Internalization of externalities and local government consolidation: empirical evidence from Japan

by

“It is found that residents of the municipalities that can internalize a large amount of public goods spillovers through municipal consolidation tend to favor consolidation. This result supports the theoretical inference that spillovers in local public goods affect utility gains from jurisdiction integration, thus serving as one of the key impetuses for boundary reform.

Moreover, after controlling for the spillover effects, economies of scale, population share, differences in median income, and unconditional grants can help explain consolidation preference.”

The fact that jurisdictional consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation in the theoretical literature. Nevertheless, previous studies provide little evidence of how public service spillover effects influence consolidation decisions. This study empirically tests the hypothesis that spillovers induce consolidation, using voting data on the consolidation of Japanese municipalities. The extent of spillovers is measured by estimating the demand function for public goods with externalities.

Published in Empirical Economics | T. Miyazaki | 2018 https://www.semanticscholar.org/paper/Internalization-of-externalities-and-local-evidence-Miyazaki/d50c2cc37b95e3fcd9527ace6797826b5e74a600

Related posts:

  1. Municipal consolidation and local government behavior: evidence from Japanese voting data on merger referenda “Municipalities that could enjoy large economies of scale from consolidation prefer consolidation, while large and small municipalities are likely to merge. Moreover, municipalities receiving large unconditional grants from the central government are unlikely to merge.” The empirical literature investigating the...
  2. Examining the relationship between municipal consolidation and cost reduction: an instrumental variable approach “Because consolidation seems to increase per capita expenditure in the absence of the effect of this long-term declining trend, incorporating this trend into estimation is crucial in cost-efficiency analysis of consolidation. It is also shown that conventional panel data regressions...
  3. The Effects of Local Government Amalgamation on Public Spending, Taxation, and Service Levels: Evidence from 15 Years of Municipal Consolidation “We study how municipal amalgamation affects local government spending, taxation, and service provision in the Netherlands. Employing different models, different control groups, and a number of robustness tests, we find no significant effect on aggregate spending or taxation, although spending...
  4. Structural Reform: Municipal Mergers “Structural reorganization using municipal mergers is a common form of local government reform. This chapter examines both the theoretical literature and associated empirical work on council consolidation. After briefly discussing the magnitude of amalgamation across the world, this chapter considers...
  5. The effects of local government amalgamation on public spending and service levels “We use difference-in-difference estimation to study how municipal amalgamation affects local government spending and public service levels in the Netherlands. Employing different models, different control groups and a number of robustness tests, we find no significant effect on aggregate spending....
  6. The Consolidation of Local Government Services: The Incidence and Practice of Service Delivery Consolidation in North Carolina “This research does suggest strong support from county managers concerning the potential for service consolidation to enhance service delivery, efficiency and accountability. This research confirms that practitioners view the potential of service consolidation as an enhancement to local government organizations....
  7. Decentralization and the duration of fiscal consolidation: shifting the burden across layers of government “The consolidation of the general government budget appears to be of longer duration when expenditure decisions are more decentralized. We also find that transfers from higher levels of government are cut during consolidation episodes, suggesting that central governments shift the...
  8. The evidence on the existence of economies of scale in local government units “This does not imply that more extensive amalgamation is not warranted, but it demands that other arguments justifying municipal amalgamation should be presented.” The purpose of this paper is to empirically verify if the possible existence of scale economies actually...
  9. A Reassessment of City/County Consolidation: Economic Development Impacts “Over the past two decades, a large body of literature has examined the fiscal consequences of city/ county consolidation. Much of this research suggests that consolidation results in expansions in local budgets and in the scope and quality of municipal...
  10. Off-budget activities of local government: Comment “The conclusion of this analysis is that tax limitations have brought about an unforeseen improvement in the structure of local government. While the actual implementation in particular cases may not always lead to desirable results, there is hope for improvement....