IDEAS home Printed from https://ideas.repec.org/p/zbw/tudcep/1617.html
   My bibliography  Save this paper

Do mergers of large local governments reduce expenditures? - Evidence from Germany using the synthetic control method

Author

Listed:
  • Roesel, Felix

Abstract

States merge local governments to achieve economies of scale. Little is known to which extent mergers of county-sized local governments reduce expenditures, and influence political outcomes. I use the synthetic control method to identify the effect of mergers of large local governments in Germany (districts) on public expenditures. In 2008, the German state of Saxony reduced the number of districts from 22 to 10. Average district population increased substantially from 113,000 to 290,000 inhabitants. I construct a synthetic counterfactual from states that did not merge districts for years. The results do neither show reductions in total expenditures, nor in expenditures for administration, education, and social care. There seems to be no scale effects in jurisdictions of more than 100,000 inhabitants. By contrast, I find evidence that mergers decreased the number of candidates and voter turnout in district elections while vote shares for populist right-wing parties increased.

Suggested Citation

  • Roesel, Felix, 2017. "Do mergers of large local governments reduce expenditures? - Evidence from Germany using the synthetic control method," CEPIE Working Papers 16/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
  • Handle: RePEc:zbw:tudcep:1617
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/170528/1/1001186818.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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. Becker, Sascha O. & Heblich, Stephan & Sturm, Daniel M., 2021. "The impact of public employment: Evidence from Bonn," Journal of Urban Economics, Elsevier, vol. 122(C).
    3. William Duncombe & John Yinger, 2007. "Does School District Consolidation Cut Costs?," Education Finance and Policy, MIT Press, vol. 2(4), pages 341-375, September.
    4. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
    5. 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.
    6. Green, Colin P. & Heywood, John S. & Navarro, María, 2016. "Traffic accidents and the London congestion charge," Journal of Public Economics, Elsevier, vol. 133(C), pages 11-22.
    7. 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.
    8. Marcus, Jan & Siedler, Thomas, 2015. "Reducing binge drinking? The effect of a ban on late-night off-premise alcohol sales on alcohol-related hospital stays in Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 55-77.
    9. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2015. "Comparative Politics and the Synthetic Control Method," American Journal of Political Science, John Wiley & Sons, vol. 59(2), pages 495-510, February.
    10. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    11. Felix Rösel, 2017. "The Political Economy of Fiscal Supervision and Budget Deficits: Evidence from Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 641-666, December.
    12. Noémi Kreif & Richard Grieve & Dominik Hangartner & Alex James Turner & Silviya Nikolova & Matt Sutton, 2016. "Examination of the Synthetic Control Method for Evaluating Health Policies with Multiple Treated Units," Health Economics, John Wiley & Sons, Ltd., vol. 25(12), pages 1514-1528, December.
    13. Moisio, Antti & Hämäläinen, Kari, 2015. "One or Two Tiers of Local Government? – The Cost Effects of a Regional Experiment," Working Papers 65, VATT Institute for Economic Research.
    14. Christian F. Pfeil & Lars P. Feld, 2016. "Does the Swiss Debt Brake Induce Sound Federal Finances? A Synthetic Control Analysis," CESifo Working Paper Series 6044, CESifo.
    15. Bharadwaj, Prashant & Johnsen, Julian V. & Løken, Katrine V., 2014. "Smoking bans, maternal smoking and birth outcomes," Journal of Public Economics, Elsevier, vol. 115(C), pages 72-93.
    16. Hyytinen, Ari & Saarimaa, Tuukka & Tukiainen, Janne, 2014. "Electoral vulnerability and size of local governments: Evidence from voting on municipal mergers," Journal of Public Economics, Elsevier, vol. 120(C), pages 193-204.
    17. Blom-Hansen, Jens & Houlberg, Kurt & Serritzlew, Sã˜Ren & Treisman, Daniel, 2016. "Jurisdiction Size and Local Government Policy Expenditure: Assessing the Effect of Municipal Amalgamation," American Political Science Review, Cambridge University Press, vol. 110(4), pages 812-831, November.
    18. Gregory DeAngelo & Benjamin Hansen, 2014. "Life and Death in the Fast Lane: Police Enforcement and Traffic Fatalities," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 231-257, May.
    19. 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.
    20. Baskaran, Thushyanthan, 2014. "Identifying local tax mimicking with administrative borders and a policy reform," Journal of Public Economics, Elsevier, vol. 118(C), pages 41-51.
    21. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    22. Nora Gordon & Brian Knight, 2008. "The Effects of School District Consolidation on Educational Cost and Quality," Public Finance Review, , vol. 36(4), pages 408-430, July.
    23. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    24. Benedikt Fritz & Lars P. Feld, 2015. "The Political Economy of Municipal Amalgamation - Evidence of Common Pool Effects and Local Public Debt," CESifo Working Paper Series 5676, CESifo.
    25. Brasington, David M., 1999. "Joint provision of public goods: the consolidation of school districts," Journal of Public Economics, Elsevier, vol. 73(3), pages 373-393, September.
    26. 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.
    27. Enid Slack & Richard M. Bird, 2013. "Merging Municipalities: Is Bigger Better?," IMFG Papers 14, University of Toronto, Institute on Municipal Finance and Governance.
    28. Maarten A. Allers & J. Bieuwe Geertsema, 2016. "The Effects Of Local Government Amalgamation On Public Spending, Taxation, And Service Levels: Evidence From 15 Years Of Municipal Consolidation," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 659-682, September.
    29. Sebastian Blesse & Felix Rösel, 2017. "Gebietsreformen: Hoffnungen, Risiken und Alternativen," ifo Working Paper Series 234, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    30. Sune Welling Hansen, 2015. "The Democratic Costs of Size: How Increasing Size Affects Citizen Satisfaction with Local Government," Political Studies, Political Studies Association, vol. 63(2), pages 373-389, June.
    31. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Teodor Hada & Iulia Iuga & Dorin Vainberg & Mihai Carut & Raluca-Andreea Pop (Damian), 2019. "Does the Number of Inhabitants Influence the Investments Financing in Territorial Administrative Units?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(4), pages 109-116, December.
    2. Joshua C. Hall & Josh Matti & Yang Zhou, 2020. "The economic impact of city–county consolidations: a synthetic control approach," Public Choice, Springer, vol. 184(1), pages 43-77, July.
    3. Blesse, Sebastian & Roesel, Felix, 2019. "Merging county administrations – cross-national evidence of fiscal and political effects," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 611-631.
    4. Stefanie Gaebler & Felix Roesel, 2019. "Do direct elections matter? Quasi-experimental evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(6), pages 1416-1445, December.
    5. Potrafke, Niklas, 2020. "Dragnet-Controls and Government Ideology," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 485-501.
    6. Bernhard Enzi & Benedikt Siegler, 2016. "The Impact of the Bologna Reform on Student Outcomes Evidence from Exogenous Variation in Regional Supply of Bachelor Programs in Germany," ifo Working Paper Series 225, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Simon Lapointe & Tuukka Saarimaa & Janne Tukiainen, 2018. "Effects of municipal mergers on voter turnout," Local Government Studies, Taylor & Francis Journals, vol. 44(4), pages 512-530, July.
    8. Chuanhao Tian & Wenjun Ji & Sijin Chen & Jinqun Wu, 2020. "The Time and Spatial Effects of A “City-County Merger” on Housing Prices—Evidence from Fuyang," Sustainability, MDPI, Open Access Journal, vol. 12(4), pages 1-26, February.
    9. Florian Dorn & Stefanie Gaebler & Felix Roesel, 2021. "Ineffective fiscal rules? The effect of public sector accounting standards on budgets, efficiency, and accountability," Public Choice, Springer, vol. 186(3), pages 387-412, March.
    10. Luisa Doerr & Florian Dorn & Stefanie Gaebler & Niklas Potrafke, 2020. "How new airport infrastructure promotes tourism: evidence from a synthetic control approach in German regions," Regional Studies, Taylor & Francis Journals, vol. 54(10), pages 1402-1412, October.
    11. 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.
    12. L. Wilner, 2020. "How do citizens perceive centralization reforms? Evidence from the merger of French regions," Documents de Travail de l'Insee - INSEE Working Papers g2020-07, Institut National de la Statistique et des Etudes Economiques.
    13. Stefanie Vanneste & Stijn Goeminne, 2020. "The role of the past in public policy: empirical evidence of the long-term effect of past policy and politics on the local budget balance," Economics of Governance, Springer, vol. 21(1), pages 75-99, March.
    14. Tavares Antonio F., 2018. "Municipal amalgamations and their effects: a literature review," Miscellanea Geographica. Regional Studies on Development, Sciendo, vol. 22(1), pages 5-15, March.
    15. Lima Ricardo Carvalho de Andrade, 2021. "The Economic Impact of State Splitting in Brazil," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(1), pages 417-432, January.
    16. Gissur Ó Erlingsson & Jonas Klarin & Eva Maria Mörk, 2021. "Does Size Matter? Evidence from Municipality Break-Ups," CESifo Working Paper Series 9042, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Sebastian Blesse & Felix Roesel, 2019. "Merging county administrations – cross-national evidence of fiscal and political effects," Local Government Studies, Taylor & Francis Journals, vol. 45(5), pages 611-631, September.
    3. Felix Rösel, 2016. "Gibt es Einspareffekte durch Kreisgebietsreformen? – Evidenz aus Ostdeutschland," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(22), pages 26-33, November.
    4. 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.
    5. repec:ces:ifodre:v:24:y:2016:i:04:p:45-49 is not listed on IDEAS
    6. Harjunen, Oskari & Saarimaa, Tuukka & Tukiainen, Janne, 2021. "Political representation and effects of municipal mergers," Political Science Research and Methods, Cambridge University Press, vol. 9(1), pages 72-88, January.
    7. Felix Rösel, 2016. "Sparen Gebietsreformen Geld? – Ein Überblick über aktuelle Studien," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(04), pages 45-49, August.
    8. 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.
    9. 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.
    10. Tavares Antonio F., 2018. "Municipal amalgamations and their effects: a literature review," Miscellanea Geographica. Regional Studies on Development, Sciendo, vol. 22(1), pages 5-15, March.
    11. 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..
    12. 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.
    13. Blesse, Sebastian & Heinemann, Friedrich, 2020. "Citizens’ trade-offs in state merger decisions: Evidence from a randomized survey experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 438-471.
    14. Sebastian Blesse & Felix Rösel, 2017. "Gebietsreformen: Hoffnungen, Risiken und Alternativen," ifo Working Paper Series 234, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    15. Joshua C. Hall & Josh Matti & Yang Zhou, 2020. "The economic impact of city–county consolidations: a synthetic control approach," Public Choice, Springer, vol. 184(1), pages 43-77, July.
    16. 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).
    17. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    18. Wei Tang & Geoffrey J.D. Hewings, 2017. "Do city–county mergers in China promote local economic development?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(3), pages 439-469, July.
    19. Peter H. Egger & Marko Köthenbürger & Gabriel Loumeau, 2017. "Local Border Reforms and Economic Activity," CESifo Working Paper Series 6738, CESifo.
    20. Saarimaa, Tuukka & Tukiainen, Janne, 2015. "Common pool problems in voluntary municipal mergers," European Journal of Political Economy, Elsevier, vol. 38(C), pages 140-152.
    21. Baskaran, Thushyanthan & Blesse, Sebastian, 2019. "Subnational border reforms and economic development in Africa," ZEW Discussion Papers 18-027, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Municipal mergers; Local government; Expenditures; Synthetic control method; Local elections; Voter turnout;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:tudcep:1617. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/pltudde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/pltudde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.