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Economies of Scale and Sustainability in Local Government: A Complex Issue

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  • Jos L. T. Blank

    (Faculty of Technology, Policy and Management, Delft University of Technology, P.O. Box 5015, 2600 GA Delft, The Netherlands
    Institute for Public Sector Efficiency (IPSE) Studies, Rotterdamseweg 183C, 2629 HD Delft, The Netherlands)

  • Thomas K. Niaounakis

    (Faculty of Technology, Policy and Management, Delft University of Technology, P.O. Box 5015, 2600 GA Delft, The Netherlands
    Institute for Public Sector Efficiency (IPSE) Studies, Rotterdamseweg 183C, 2629 HD Delft, The Netherlands)

Abstract

Local governments may seek efficient public service delivery through scaling up production, and the quest for the optimal local government size has attracted extensive attention of scholars and policy makers. Indeed, if scale matters for local government efficiency, increasing size may be a key factor in achieving more value for money for citizens. As such, getting scale right may contribute significantly to achieving the Sustainable Development Goals (SDGs) as set out in the 2030 Agenda. Nonetheless, there is considerable uncertainty with regard to how scale shapes the average cost of local government service delivery. These uncertainties may have contributed to policy makers and public organizations disregarding the often inconclusive and sometimes contradictory empirical evidence in stimulating and allowing mergers and consolidation in many Western countries. This Special Issue is concerned with economies of scale in local government. Interesting issues to be addressed relate to the existence of general and service specific economies of scale and the implications of both for local government policy regarding various types of scaling (amalgamation, cooperation, and outsourcing). Based on a brief literature review, we inventory a number of issues which warrant further research. One of the conclusions is that the relationship between scale and sustainability is a complex issue with many aspects. Examples include the relation between economies of scale and outsourcing and cooperation, issues concerned with multi-level aspects of scale, and the trade-off that may exist between achieving economies of scale and cost efficiency (e.g., transition cost of mergers). Another conclusion is that no such thing as “one size fits all” exists. Different perspectives may play a role and should be born in mind when suggesting solutions and providing recommendations to achieve sustainable goals.

Suggested Citation

  • Jos L. T. Blank & Thomas K. Niaounakis, 2021. "Economies of Scale and Sustainability in Local Government: A Complex Issue," Sustainability, MDPI, vol. 13(23), pages 1-10, November.
  • Handle: RePEc:gam:jsusta:v:13:y:2021:i:23:p:13262-:d:691965
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    References listed on IDEAS

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    1. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75(2), pages 123-123.
    2. Jos L. T. Blank & Bart L. van Hulst & Vivian G. Valdmanis, 2017. "Concentrating Emergency Rooms: Penny‐Wise and Pound‐Foolish? An Empirical Research on Scale Economies and Chain Economies in Emergency Rooms in Dutch Hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1353-1365, November.
    3. Gerard Turley & John McDonagh & Stephen McNena & Arkadiusz Grzedzinski, 2018. "Optimum Territorial Reforms in Local Government: An Empirical Analysis of Scale Economies in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 49(4), pages 463-488.
    4. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    5. Germà Bel & Xavier Fageda, 2017. "What have we learned from the last three decades of empirical studies on factors driving local privatisation?," Local Government Studies, Taylor & Francis Journals, vol. 43(4), pages 503-511, July.
    6. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
    7. De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
    8. Luan V. Bernardelli & Brian E. Dollery & Michael A. Kortt, 2021. "An Empirical Analysis of Scale Economies in Administrative Intensity in the Paraná State Local Government System in Brazil," Sustainability, MDPI, vol. 13(2), pages 1-13, January.
    9. Maarten A. Allers & J. Bieuwe Geertsema, 2016. "The Effects Of Local Government Amalgamation On Public Spending, Taxation, And Service Levels: Evidence From 15 Years Of Municipal Consolidation," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 659-682, September.
    10. Takeshi Miyazaki, 2021. "Economies of Scope and Local Government Expenditure: Evidence from Creation of Specially Authorized Cities in Japan," Sustainability, MDPI, vol. 13(5), pages 1-22, March.
    11. Germà Bel & Mildred E. Warner, 2016. "Factors explaining inter-municipal cooperation in service delivery: a meta-regression analysis," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(2), pages 91-115, April.
    12. Thomas Niaounakis & Jos Blank, 2017. "Inter-municipal cooperation, economies of scale and cost efficiency: an application of stochastic frontier analysis to Dutch municipal tax departments," Local Government Studies, Taylor & Francis Journals, vol. 43(4), pages 533-554, July.
    13. Blom-Hansen, Jens & Houlberg, Kurt & Serritzlew, Søren & Treisman, Daniel, 2016. "Jurisdiction Size and Local Government Policy Expenditure: Assessing the Effect of Municipal Amalgamation," American Political Science Review, Cambridge University Press, vol. 110(4), pages 812-831, November.
    14. Jos L. T. Blank, 2021. "Sustainable Provision of School Buildings in The Netherlands: An Empirical Productivity Analysis of Local Government School Building Operations," Sustainability, MDPI, vol. 13(16), pages 1-11, August.
    15. Jacob Bikker & Daan van der Linde, 2016. "Scale economies in local public administration," Local Government Studies, Taylor & Francis Journals, vol. 42(3), pages 441-463, May.
    16. Jos L. T. Blank & Thomas K. Niaounakis, 2019. "Managing Size of Public Schools and School Boards: A Multi-Level Cost Approach Applied to Dutch Primary Education," Sustainability, MDPI, vol. 11(23), pages 1-11, November.
    17. Ferguson, C E & Saving, Thomas R, 1969. "Long-Run Scale Adjustments of a Perfectly Competitive Firm and Industry," American Economic Review, American Economic Association, vol. 59(5), pages 774-783, December.
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