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Common pool size and project size: an empirical test on expenditures using Danish municipal mergers

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  • Sune Welling Hansen

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Abstract

The paper examines the proposition from the law of 1 over n (Weingast et al. 1981 ) that project size tends to increase with common pool size. Comparable studies have tended, firstly, to focus on assets and debt rather than on expenditures and, secondly, on district population rather than on the number of districts as in the original formulation of the law. Both issues are sought to be remedied in this paper. The proposition is examined on Danish municipal expenditures from 1996 to 2006, using municipal mergers towards the end of this period as a quasi-experiment. A difference-in-difference identification strategy and a subsample strategy are used to identify the effect of the availability and size of a common pool on municipal expenditures. The paper finds positive, statistically and economically significant effects of the availability and size of a common pool in the final year of the treatment period. The importance of the number of districts over district population suggests a reappraisal of the law of 1 over n as originally formulated. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Sune Welling Hansen, 2014. "Common pool size and project size: an empirical test on expenditures using Danish municipal mergers," Public Choice, Springer, vol. 159(1), pages 3-21, April.
  • Handle: RePEc:kap:pubcho:v:159:y:2014:i:1:p:3-21
    DOI: 10.1007/s11127-012-0009-y
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    File URL: http://hdl.handle.net/10.1007/s11127-012-0009-y
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    References listed on IDEAS

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    1. Henrik Jordahl & Che-Yuan Liang, 2010. "Merged municipalities, higher debt: on free-riding and the common pool problem in politics," Public Choice, Springer, vol. 143(1), pages 157-172, April.
    2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    3. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
    4. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
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    Citations

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    Cited by:

    1. Saarimaa, Tuukka & Tukiainen, Janne, 2015. "Common pool problems in voluntary municipal mergers," European Journal of Political Economy, Elsevier, vol. 38(C), pages 140-152.
    2. repec:eee:regeco:v:66:y:2017:i:c:p:132-149 is not listed on IDEAS
    3. Tsuyoshi Goto & Genki Yamamoto, 2018. "Creative Accounting and Municipal Mergers -A Theoretical and Empirical Approach-," OSIPP Discussion Paper 18E012, Osaka School of International Public Policy, Osaka University.
    4. Allers, Maarten & van Ommeren, Bernard & Geertsema, Bieuwe, 2015. "Does intermunicipal cooperation create inefficiency? A comparison of interest rates paid by intermunicipal organizations, amalgamated municipalities and not recently amalgamated municipalities," Research Report 15003-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Blesse, Sebastian & Baskaran, Thushyanthan, 2016. "Do municipal mergers reduce costs? Evidence from a German federal state," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 54-74.
    6. Masayoshi Hayashi & Takafumi Suzuki, 2018. "Municipal Mergers and Capitalization: Evaluating the Heisei Territorial Reform in Japan," CIRJE F-Series CIRJE-F-1105, CIRJE, Faculty of Economics, University of Tokyo.
    7. Blesse Sebastian & Rösel Felix, 2017. "Was bringen kommunale Gebietsreformen?: Kausale Evidenz zu Hoffnungen, Risiken und alternativen Instrumenten," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 18(4), pages 307-324, November.
    8. Feld, Lars P. & Fritz, Benedikt, 2015. "The political economy of municipal amalgamation: Evidence of common pool effects and local public debt," Freiburg Discussion Papers on Constitutional Economics 15/10, Walter Eucken Institut e.V..
    9. Blesse, Sebastian & Baskaran, Thushyanthan, 2013. "Do municipal mergers result in scale economies? Evidence from a German federal state," Center for European, Governance and Economic Development Research Discussion Papers 176, University of Goettingen, Department of Economics.
    10. Tsuyoshi Goto & Sandra Sekgetle & Takashi Kuramoto, 2019. "Municipal Merger and Debt Issuance in South African Municipality," OSIPP Discussion Paper 19E001, Osaka School of International Public Policy, Osaka University.
    11. Saito, Hitoshi & Hirota, Haruaki & Yunoue, Hideo & Miyaki, Miki, 2017. "Does municipal mergers internalize spatial spillover effects? Empirical evidence from Japanese municipalities," MPRA Paper 76833, University Library of Munich, Germany.
    12. repec:kap:pubcho:v:175:y:2018:i:3:d:10.1007_s11127-018-0548-y is not listed on IDEAS
    13. Lapointe, Simon & Saarimaa, Tuukka & Tukiainen, Janne, 2018. "Effects of Municipal Mergers on Voter Turnout," Working Papers 106, VATT Institute for Economic Research.
    14. Nobuo Akai & Tsuyoshi Goto, 2018. "Strategic Intertemporal Budget Allocation of Local Governments in the Model with Spillovers and Mergers," OSIPP Discussion Paper 18E011, Osaka School of International Public Policy, Osaka University.
    15. Hirota, Haruaki & Yunoue, Hideo, 2019. "Public investment and the fiscal common pool problem on municipal mergers in Japan," MPRA Paper 95571, University Library of Munich, Germany.
    16. repec:dgr:rugsom:14019-eef is not listed on IDEAS
    17. Björn Kauder, 2016. "Incorporation of municipalities and population growth: A propensity score matching approach," Papers in Regional Science, Wiley Blackwell, vol. 95(3), pages 539-554, August.
    18. Allers, Maarten & Geertsema, Bieuwe, 2014. "The effects of local government amalgamation on public spending and service levels," Research Report 14019-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    19. Hirota, Haruaki & Yunoue, Hideo, 2017. "Evaluation of the fiscal effect on municipal mergers: Quasi-experimental evidence from Japanese municipal data," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 132-149.
    20. repec:eee:poleco:v:52:y:2018:i:c:p:75-84 is not listed on IDEAS

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