Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v38y2015icp140-152.html
   My bibliography  Save this article

Common pool problems in voluntary municipal mergers

Author

Listed:
  • Saarimaa, Tuukka
  • Tukiainen, Janne
Abstract
We analyze free-riding behavior of Finnish municipalities prior to voluntary municipal mergers. The merger process creates a temporary common pool problem, because of a delay from the initial decision to the actual merger during which municipalities stay autonomous. Using a difference-in-differences strategy, we find that the stronger free-riding incentive a municipality faced the more it increased its debt and spent its cash reserves. These funds were spent mostly on investments and current expenditures.

Suggested Citation

  • Saarimaa, Tuukka & Tukiainen, Janne, 2015. "Common pool problems in voluntary municipal mergers," European Journal of Political Economy, Elsevier, vol. 38(C), pages 140-152.
    • Handle: RePEc:eee:poleco:v:38:y:2015:i:c:p:140-152
    DOI: 10.1016/j.ejpoleco.2015.02.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S017626801500021X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejpoleco.2015.02.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bernard Dafflon, 2012. "Voluntary amalgamation of local governments: the Swiss debate in the European context," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1204, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Toke S. Aidt & Julia Shvets, 2012. "Distributive Politics and Electoral Incentives: Evidence from Seven US State Legislatures," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 1-29, August.
    3. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1027-1056.
    4. Baron, David P. & Ferejohn, John A., 1989. "Bargaining in Legislatures," American Political Science Review, Cambridge University Press, vol. 83(4), pages 1181-1206, December.
    5. Brian Knight, 2008. "Legislative Representation, Bargaining Power and the Distribution of Federal Funds: Evidence from the US Congress," Economic Journal, Royal Economic Society, vol. 118(532), pages 1785-1803, October.
    6. Saarimaa, Tuukka & Tukiainen, Janne, 2016. "Local representation and strategic voting: Evidence from electoral boundary reforms," European Journal of Political Economy, Elsevier, vol. 41(C), pages 31-45.
    7. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
    8. Miceli Thomas J., 1993. "The Decision to Regionalize in the Provision of Education: An Application of the Tiebout Model," Journal of Urban Economics, Elsevier, vol. 33(3), pages 344-360, May.
    9. Eric Weese, 2015. "Political mergers as coalition formation: An analysis of the Heisei municipal amalgamations," Quantitative Economics, Econometric Society, vol. 6(2), pages 257-307, July.
    10. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    11. 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).
    12. Baskaran, Thushyanthan, 2013. "Coalition governments, cabinet size, and the common pool problem: Evidence from the German states," European Journal of Political Economy, Elsevier, vol. 32(C), pages 356-376.
    13. 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.
    14. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    15. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    16. 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.
    17. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    18. Baron, David P & Ferejohn, John, 1987. "Bargaining and Agenda Formation in Legislatures," American Economic Review, American Economic Association, vol. 77(2), pages 303-309, May.
    19. 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.
    20. Philip R. Lane, 2012. "The European Sovereign Debt Crisis," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 49-68, Summer.
    21. Borge, Lars-Erik, 2005. "Strong politicians, small deficits: evidence from Norwegian local governments," European Journal of Political Economy, Elsevier, vol. 21(2), pages 325-344, June.
    22. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
    23. 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.
    24. Timothy Besley & Anne Case, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 769-798.
    25. Reza Baqir, 2002. "Districting and Government Overspending," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1318-1354, December.
    26. Saarimaa, Tuukka & Tukiainen, Janne, 2016. "Local representation and strategic voting: Evidence from electoral boundary reforms," European Journal of Political Economy, Elsevier, vol. 41(C), pages 31-45.
    27. Ferraz, Claudio & Finan, Frederico S., 2007. "Electoral Accountability and Corruption in Local Governments: Evidence from Audit Reports," IZA Discussion Papers 2843, Institute of Labor Economics (IZA).
    28. Tukiainen, Janne & Saarimaa, Tuukka & Hyytinen, Ari, 2013. "Seat competitiveness and redistricting: Evidence from voting on municipal mergers," Working Papers 38, VATT Institute for Economic Research.
    29. Lynn MacDonald, 2008. "The impact of government structure on local public expenditures," Public Choice, Springer, vol. 136(3), pages 457-473, September.
    30. Saarimaa, Tuukka & Tukiainen, Janne, 2014. "I Don't Care to Belong to Any Club That Will Have Me as a Member: Empirical Analysis of Municipal Mergers," Political Science Research and Methods, Cambridge University Press, vol. 2(1), pages 97-117, April.
    31. 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.
    32. Claudio Ferraz & Frederico Finan, 2011. "Electoral Accountability and Corruption: Evidence from the Audits of Local Governments," American Economic Review, American Economic Association, vol. 101(4), pages 1274-1311, June.
    33. repec:dgr:rugsom:14019-eef is not listed on IDEAS
    34. Jens Blom‐Hansen & Kurt Houlberg & Søren Serritzlew, 2014. "Size, Democracy, and the Economic Costs of Running the Political System," American Journal of Political Science, John Wiley & Sons, vol. 58(4), pages 790-803, October.
    35. 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.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Saarimaa, Tuukka & Tukiainen, Janne, 2016. "Local representation and strategic voting: Evidence from electoral boundary reforms," European Journal of Political Economy, Elsevier, vol. 41(C), pages 31-45.
    3. 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.
    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. 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.
    6. 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.
    7. Frank, Marco & Stadelmann, David, 2021. "More federal legislators lead to more resources for their constituencies: Evidence from exogenous differences in seat allocations," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 230-243.
    8. 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.
    9. Saarimaa, Tuukka & Tukiainen, Janne, 2016. "Local representation and strategic voting: Evidence from electoral boundary reforms," European Journal of Political Economy, Elsevier, vol. 41(C), pages 31-45.
    10. 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..
    11. Halse, Askill H., 2016. "More for everyone: The effect of local interests on spending on infrastructure," European Journal of Political Economy, Elsevier, vol. 43(C), pages 41-56.
    12. Benedikt Fritz & Lars P. Feld, 2020. "Common pool effects and local public debt in amalgamated municipalities," Public Choice, Springer, vol. 183(1), pages 69-99, April.
    13. Hitoshi Saito & Haruaki Hirota & Hideo Yunoue & Miki Miyaki, 2023. "Do municipal mergers internalise spatial spillover effects? empirical evidence from Japanese municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 70(2), pages 379-406, April.
    14. Lapointe, Simon, 2018. "“Love thy neighbour”? The effect of income and language differences on votes for municipal secessions," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 229-245.
    15. 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.
    16. 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.
    17. Peter Bönisch & Benny Geys & Claus Michelsen, 2015. "David and Goliath in the Poll Booth: Group Size, Voting Power and Voter Turnout," Discussion Papers of DIW Berlin 1491, DIW Berlin, German Institute for Economic Research.
    18. 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.
    19. 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.
    20. Astrid Marie Jorde Sandsør & Torberg Falch & Bjarne Strøm, 2022. "Long‐run Effects of Local Government Mergers on Educational Attainment and Income," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(1), pages 185-213, February.

    More about this item

    Keywords

    Common pool; Difference-in-differences; Law of 1/n; Municipality mergers;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

    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:eee:poleco:v:38:y:2015:i:c:p:140-152. See general information about how to correct material in RePEc.

    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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.