Concept of Municipal Mergers: Evidence From Republic of Armenia

Abstract

Municipality mergers are an important policy question in many countries, but empirical evidence on the effect of municipal mergers on the production of municipal budget (effectiveness) income is limited (before and after mergers).

I study the fiscal consequences of municipal mergers by making use of a large scale merger reform in the Republic of Armenia. This reform, which was implemented from 2016 to 2017, led to a substantial reduction in the number of municipalities. Using a difference-in-difference design with municipality-level panel data over 2011-2020, I find substantial increase in total income, and municipal budget own income (local revenue) after mergers.

Keywords: municipal mergers, municipalities, municipal budget income, local revenue, Republic of Armenia

JEL Classification: P25, R11, R51, R58