Is there an optimal size for local governments? A spatial panel data model approach

Miriam Hortas-Rico and Vicente Rios

No 1809, Working Papers. Collection A: Public economics, governance and decentralization from Universidade de Vigo, GEN - Governance and Economics research Network

Abstract: The paper presents a framework for determining the optimal size of local jurisdictions. To that aim, we first develop a theoretical model of cost eficiency that takes into account spatial interactions and spillover effects among neighbouring jurisdictions. The model solution leads to a Spatial Durbin panel data specification of local spending as a non-linear function of population size. The model is tested using local data over the 2003-2011 period for two aggregate (total and current) and four disaggregate measures of spending. The empirical findings suggest a U-shaped relationship between population size and the costs of providing public services that varies depending on (i) the public service provided and (ii) the geographical heterogeneity of the territory.

Keywords: Optimal Government Size; Spatial Panels; Spanish Municipalities. (search for similar items in EconPapers)
JEL-codes: H11 H72 H77 R12 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018-02
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://infogen.webs.uvigo.es/WP/WP1809.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Is there an optimal size for local governments? A spatial panel data model approach (2020)
Working Paper: Is there an Optimal Size for Local Governments? A Spatial Panel Data Model Approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gov:wpaper:1809

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