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

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  • 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.

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  • Roesel, Felix, 2017. "Do mergers of large local governments reduce expenditures? – Evidence from Germany using the synthetic control method," European Journal of Political Economy, Elsevier, vol. 50(C), pages 22-36.
    • Handle: RePEc:eee:poleco:v:50:y:2017:i:c:p:22-36
    DOI: 10.1016/j.ejpoleco.2017.10.002
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    3. 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.
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    10. 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.
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    13. 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.
    14. Daniel Albalate & Germà Bel, 2018. "“Do government formation deadlocks damage economic growth? Evidence from history’s longest period of political deadlock”," IREA Working Papers 201817, University of Barcelona, Research Institute of Applied Economics, revised Jul 2018.
    15. 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.
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    20. Iliopoulos, Panagiotis & De Witte, Kristof, 2024. "The expenditure composition and trade-offs in local government budgets," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
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    More about this item

    Keywords

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

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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