A Procedure for the Ex-Ante Assessment of Compulsory Municipal Amalgamation Programs

29 Pages Posted: 13 Jul 2015

See all articles by Dino Rizzi

Dino Rizzi

Ca Foscari University of Venice - Dipartimento di Economia

Michele Zanette

Ca' Foscari University of Venice, Department of Economics

Date Written: July 7, 2015

Abstract

The aim of the paper is to develop a procedure that allows policy makers to make an ex-ante assessment of a general compulsory amalgamation policy, providing quantitative indications about the possible financial effects. The amalgamation of small municipalities is a widespread practice all over the world. This policy is based on the assumption that local public service provision is characterized by economies of scale and economies of scope. However, population size is not the only determinant of economies of scale, which depend on many other factors. For these reasons, the expected effects of any amalgamation program are uncertain, and ex-post empirical analyses are unable to offer unambiguous indications to policy makers since all programs differ.

After a brief discussion of the relevant issues concerning amalgamation, we present the procedure used to simulate the economics and administrative effects of a general compulsory amalgamation policy. The procedure is tested with reference to the municipalities of Veneto, a region of Italy and we provide the results of a number of simulations under alternative amalgamation policies. The main result is that amalgamation policies based only on the a priori rule that small municipalities should merge may be very inefficient because the expenditure reduction following an amalgamation policy may depend to a considerable extent on other territorial and socio-economic characteristics of the municipalities involved.

Keywords: Tax municipality; amalgamation; local government expenditure; economies of scale

JEL Classification: H11, H72, H77, R51

Suggested Citation

Rizzi, Dino and Zanette, Michele, A Procedure for the Ex-Ante Assessment of Compulsory Municipal Amalgamation Programs (July 7, 2015). University Ca' Foscari of Venice, Dept. of Economics Working Paper Series No. 22/WP/2015. Available at SSRN: https://ssrn.com/abstract=2629927 or http://dx.doi.org/10.2139/ssrn.2629927

Dino Rizzi (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/rizzid

Michele Zanette

Ca' Foscari University of Venice, Department of Economics ( email )

Cannaregio 873
Venice, 30121
Italy

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