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Is there an Optimal Size for Local Governments? A Spatial Panel Data Model Approach

Miriam Hortas-Rico () and Vicente Rios ()
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Vicente Rios: Department of Economics, Public University of Navarre

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

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 efficiency 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.

New Economics Papers: this item is included in nep-ure
Date: 2018-02
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http://icepp.gsu.edu/files/2018/02/paper1807.1.pdf (application/pdf)

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Working Paper: Is there an optimal size for local governments? A spatial panel data model approach (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper1807

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