Merging County Administrations – Cross-National Evidence of Fiscal and Political Effects

Sebastian Blesse,Felix Roesel

doi:10.2139/ssrn.3208100

Abstract

While many central governments amalgamate municipalities, mergers of larger county administrations are rare and hardly explored. In this paper, we assess both fiscal and political effects of county mergers in two different institutional settings: counties act autonomously as upperlevel local governments (Germany), or counties being decentralised branches of the state government (Austria). We apply difference-in-differences estimations to county merger reforms in each country. In both cases, some counties were amalgamated while others remain untouched. Austrian counties (Bezirke) and German counties (Landkreise) widely differ in terms of autonomy and institutions, but our results are strikingly similar. In both cases, we neither find evidence for cost savings nor for staff reductions. Instead, voter turnout consistently decreases in merged counties, and right-wing populists seem to gain additional support. We conclude that political costs clearly outweigh fiscal null benefits of county merger reforms – independent of the underlying institutional setting.

Highlights

‘Is bigger better?’1 While evidence on the effects of municipal mergers becomes more and more settled, studies on mergers of larger county administrations are fairly rare
Expenditures for rents increase rather than decrease in merged counties, which might be a result of the reorganisation of county administrations: Enlarged administrations quickly need larger buildings and offices in the new county capital
The findings confirm our baseline results: We find significant increases in rent expenditures in merged counties but do not prove any cost reduction

Summary

Introduction

‘Is bigger better?’1 While evidence on the effects of municipal mergers becomes more and more settled, studies on mergers of larger county administrations are fairly rare. Our empirical analysis compares merged counties to non-merged counties within the same German or Austrian federal state In both cases, we neither find evidence for cost savings nor for staff reductions. We collect annual data on expenditures in different categories, on the number of staff and on political economy outcomes (voter turnout, party vote shares) for all counties of the German state of Saxony-Anhalt for the period 1995 to 2016 from official publications. Staff Materials Rents Maintenance Interest payments Investments Staff (per 1,000 capita) Employees Full time equivalents Political economy (county council elections) Voter turnout Vote share right-wing populists Vote share non-partisans Controls log Population Accrual accounting Decentralised public employment service. We collect some 3-year averages of county administration staff before and after the merger reform from publications of the Court of Auditors and the state government accompanying the annual budget.. We take this as a first piece of evidence that the merger reform may have not resulted in savings on the county level

Results

Conclusion

Notes on contributors