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Population size or population density? An empirical examination of scale economies in South Australian local government, 2015/16

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  • Carolyn Tran
  • Michael Kortt
  • Brian Dollery

Abstract

Advocates of amalgamation typically claim that substantial scale economies flow from municipal mergers, which generate larger local government entities by population size. We examined whether economies of scale exist in council outlays by analysing the expenditure of 68 South Australian local government areas using data from the 2015/16 financial year. However, given the correlation between population size and population density it is important to determine whether the influence of population size on expenditure is due to variations in population density. We find that when local government areas are stratified into subgroups on the basis of population density, the evidence of economies of scale largely evaporates. From a policy perspective, this suggests that in place of municipal mergers, policymakers should instead explore avenues for shared service arrangements in those functions which exhibit scale economies.

Suggested Citation

  • Carolyn Tran & Michael Kortt & Brian Dollery, 2019. "Population size or population density? An empirical examination of scale economies in South Australian local government, 2015/16," Local Government Studies, Taylor & Francis Journals, vol. 45(5), pages 632-653, September.
    • Handle: RePEc:taf:flgsxx:v:45:y:2019:i:5:p:632-653
    DOI: 10.1080/03003930.2018.1501364
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    Cited by:

    1. Hirota, Haruaki & Iwata, Kazuyuki & Tanaka, Kenta, 2022. "Is public official training effective at reducing costs? Evidence from survey data on Japanese municipal mergers," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 145-158.
    2. Luan V. Bernardelli & Brian E. Dollery & Michael A. Kortt, 2021. "An Empirical Analysis of Scale Economies in Administrative Intensity in the Paraná State Local Government System in Brazil," Sustainability, MDPI, vol. 13(2), pages 1-13, January.
    3. Hirota, Haruaki & Yunoue, Hideo, 2020. "Public investment and the fiscal common pool problem on municipal mergers in Japan," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 124-135.

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