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Common pool problems in voluntary municipal mergers

Tuukka Saarimaa () and Janne Tukiainen ()

European Journal of Political Economy, 2015, vol. 38, issue C, 140-152

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.

Keywords: Common pool; Difference-in-differences; Law of 1/n; Municipality mergers (search for similar items in EconPapers)
JEL-codes: D72 H72 H74 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Common Pool Problems in Voluntary Municipal Mergers (2014) Downloads
Working Paper: Common Pool Problems in Voluntary Municipal Mergers (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:38:y:2015:i:c:p:140-152

DOI: 10.1016/j.ejpoleco.2015.02.006

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