Do Municipal Mergers Reduce Costs? Evidence from a German Federal State

47 Pages Posted: 12 Dec 2013 Last revised: 26 Nov 2014

See all articles by Sebastian Blesse

Sebastian Blesse

Deutsche Bundesbank

Thushyanthan Baskaran

University of Goettingen (Göttingen)

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Date Written: December 10, 2013


The extant empirical evidence on the fiscal consequences of municipal mergers is ambiguous. We therefore revisit this question by making use of a merger reform in the German federal state of Brandenburg in 2003. In addition to identifying the causal effects of mergers on municipal expenditures by relying on a natural experiment, one novel contribution of our study is to explore the fiscal consequences of both compulsory and voluntary municipal mergers within the same institutional setting. Using a difference-in-difference design with municipality-level panel data (aggregated to post-reform territorial boundaries), we find substantial and immediate reductions in total, administrative and current expenditures per capita after compulsory mergers. Voluntary mergers, on the other hand, have smaller and less robust effects.

Keywords: Municipal mergers, economies of scale, voluntary and compulsory mergers

JEL Classification: H11, H72, H77, R53

Suggested Citation

Blesse, Sebastian and Baskaran, Thushyanthan, Do Municipal Mergers Reduce Costs? Evidence from a German Federal State (December 10, 2013). Available at SSRN: or

Sebastian Blesse

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

Thushyanthan Baskaran (Contact Author)

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073

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