Cost Inefficiency of Municipalities after Amalgamation

Katsuyoshi Nakazawa

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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. Employing the stochastic frontier cost function to estimate the inefficiency of local public expenditure due to slack, this study investigated 479 Japanese municipalities that had amalgamated from 2000 to 2005. This work used the technical inefficiency variable “Number of municipalities that participated in an amalgamation” and a dummy variable for “The newly-established-municipality form of amalgamation.” Results show that these variables have an impact on the cost inefficiency of local public expenditure. Average efficiency scores in the two estimations carried out were 1.145 and 1.100. The estimation results showed that municipality amalgamation produces integration costs (slack) in an administrative organization. The degree of slack depends on the form of amalgamation.

Keywords: Municipality amalgamation; Cost inefficiency; Slack cost; Stacastic frontier analysis; Japan (search for similar items in EconPapers)
JEL-codes: E62 H20 K34 N00 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2013
New Economics Papers: this item is included in nep-eff, nep-mac and nep-pbe
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Citations: View citations in EconPapers (8)

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