The evidence on the existence of economies of scale in local government units

by

“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 supports the argument that municipal consolidation is needed in Slovenia. The major reform of local self-government in Slovenia was implemented in 1994, when the transformation of existing 58 »communal« municipalities was envisaged. From 1995 onwards, the number of municipalities increased to the current number of 212 municipalities. Consequently, the necessity to implement structural reforms of local self-government in Slovenia has been stressed.

The arguments favoring municipal amalgamations stressed that country has become too fragmented and municipal amalgamation would enable the reduction of (administrative) costs, and increase efficiency as well as quality of services provided, indicating that technical aspects of local government operation are targeted. Following, technical efficiency of Slovenian municipalities is estimated with the Data Envelopment Analysis (DEA) method, in order to determine if (and which) municipalities are experiencing increasing returns to scale (i.e., scale economies). The results indicate that there is important scale efficiency component, and predominantly very small municipalities are experiencing economies of scale, but their number is relatively low. Therefore, one of the classical arguments for municipal amalgamation, achieving economies of scale, can only be applied at a limited scale. 

Published in KnE Social Sciences | Primož Pevcin | 2017, https://www.semanticscholar.org/paper/The-evidence-on-the-existence-of-economies-Of-scale-Pevcin/1a603c5628a9d4f5f72e354dd02f22f45b9123af, https://consensus.app/details/this-imply-amalgamation-warranted-demands-arguments-pevcin/581e925759fb579189acccf4680f0353/


Related posts:

  1. No Aladdin’s Cave in New South Wales? Local Government Amalgamation, Scale Economies, and Data Envelopment Analysis Specification “We find evidence that a significant proportion of municipalities scheduled for amalgamation already exceed optimal scale and that the great majority of “amalgamated” entities will initially exhibit decreasing returns to scale. Our findings thus stand in stark contrast to the...
  2. 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...
  3. Economies of Scale in Municipal Administration. Empirical Analyses of Municipal Mergers “In an exploratory application for four municipal mergers, we find no evidence for increasing economies of scale. Compared to the level prior to the mergers, average current expenditure for the municipal administration increased more than in a control group of...
  4. Scale Economies And Police Department Consolidation: Evidence From Los Angeles “Empirical analysis here rejects the hypothesis that police output is produced under increasing returns, which would be an efficiency explanation for the large degree of consolidation found within the county.” This paper tests for scale economies for police departments operating...
  5. Did the Big Stick Work? An Empirical Assessment of Scale Economies and the Queensland Forced Amalgamation Program “In 2007, the Queensland Government imposed forced amalgamation with the number of local authorities falling from 157 to just 73 councils. Amalgamation was based inter alia on the assumption that increased economies of scale would generate savings. This paper empirically...
  6. Local government amalgamation policy: A highway maintenance evaluation “While new governance practices introduced contemporaneously lifted the level of performance of local authorities in terms of higher technical efficiency, there is no evidence that the amalgamation policy contributed to this improvement.” Abstract: “Evaluating the effects of a change in...
  7. Cost Inefficiency of Municipalities after Amalgamation “The estimation results showed that municipality amalgamation produces integration costs (slack) in an administrative organization” This paper focuses on the increase in slack costs due to municipality amalgamation, which is pushed forward in several countries to achieve economies of scale....
  8. Municipal amalgamations and their effects: a literature review “Despite the significant variation across countries and reforms, some regularities emerge: cost savings being primarily limited to general administration expenditures (wages, office supplies, and so on), few changes in the quality of local services, and the diminished quality of local...
  9. Bigger but not always better: Size and democracy in Israeli amalgamated local governments “This study reveals that amalgamation reduces local democracy in terms of voter turnout and representation. The likelihood of having a greater level of local democracy increases in smaller local governments, in terms of population. “ “The new efficiency and democracy...
  10. How Coerced Municipal Amalgamations Thwart the Values of Local Self-Government “Arguments invoking increased functional efficiency have had a profound impact on local government reforms in advanced democracies during the past 60 years. Consequently, most mature democracies have implemented municipal amalgamation reforms, often through top-down coercion. In this article, we demonstrate...