Abstract
The purpose of this paper is to determine whether larger or smaller municipalities are more efficient in their levels of overhead costs. The operative measure is per capita annual costs for these services. In addition, the issue of market structure as a factor in these costs is also to be studied. It is not for the purpose of considering costs for specific services but rather the general overhead items that are required of all local governments. The method of study will be to use the cities and towns of New York State over a number of years. This will ensure that the study group is relatively homogeneous over applicable state laws as well as giving a wide variation in the population levels studied. The per capita expenditures will be regressed against population and market power variables using several equation forms. The results will be tested for significance in scale effects and market power effects. Optimal population sizes will be calculated where possible. The outline of the paper is as follows: 1) Introduction, 2) Background issues, 3) The study design, 4) Data, 5) Results, and 6) Conclusions.
Highlights
Should municipalities merge in order to take advantage of having fewer mayors/city managers/department heads, etc.? Would there be meaningful savings for the taxpayers if they did so? Are there reasons why such mergers would not be cost saving? This paper is written to look at these questions from the relatively narrow perspective of overhead costs
The issue of market structure as a factor in these costs is to be studied. It is not for the purpose of considering costs for specific services but rather the general overhead items that are required of all local governments
The per capita expenditures will be regressed against population and market power variables using several equation forms
Summary
Should municipalities merge in order to take advantage of having fewer mayors/city managers/department heads, etc.? Would there be meaningful savings for the taxpayers if they did so? Are there reasons why such mergers would not be cost saving? This paper is written to look at these questions from the relatively narrow perspective of overhead costs. Even if the residence is rented, there is a cost to moving one’s belongings and settling in a new community This is likely to be the reason that people who are moving into an area from some other area of the country are so selective in making the initial choice; they don’t want to have to incur those costs a second time. It follows, for current residents, that the local government may be able to move away from the consumer’s preferred position up to the point where the disutility of moving just equals the loss due to staying; that is, the difference between the net utility given by a potential competitive community and the net utility in the current location. Et al [3] provide further support
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