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Common pool effects and local public debt in amalgamated municipalities

Author

Listed:
  • Benedikt Fritz

    (Walter Eucken Institut)

  • Lars P. Feld

    (Walter Eucken Institut)

Abstract

This paper investigates whether the large scale municipal amalgamations in the German state of Baden-Wuerttemberg in the early 1970s led to considerable common pool exploitation. Through amalgamation the resources of several municipalities are pooled together disclosing the former independent municipalities a larger source of funds. Additionally, the pooling also decreases the cost of local public goods, as those have to be borne by the whole of the amalgamated municipality. By exploiting the huge variance in the amalgamation process in terms of number of participating municipalities, but also in municipality size or amalgamation strategy, we identify considerable common pool effects. Amalgamated municipalities show considerably stronger acceleration in debt accumulation compared to non-amalgamating municipalities. This common pool exploitation is stronger if more municipalities participate and when municipalities amalgamate by annexation.

Suggested Citation

  • Benedikt Fritz & Lars P. Feld, 2020. "Common pool effects and local public debt in amalgamated municipalities," Public Choice, Springer, vol. 183(1), pages 69-99, April.
    • Handle: RePEc:kap:pubcho:v:183:y:2020:i:1:d:10.1007_s11127-019-00688-2
    DOI: 10.1007/s11127-019-00688-2
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    2. Ning Jia & Huiyong Zhong, 2022. "The Causes and Consequences of China's Municipal Amalgamations: Evidence from Population Redistribution," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(4), pages 174-200, July.
    3. Geert Jennes, 2021. "Interregional fiscal transfers resulting from central government debt: New insights and consequences for political economy," Kyklos, Wiley Blackwell, vol. 74(2), pages 196-223, May.
    4. Goto, Tsuyoshi & Yamamoto, Genki, 2023. "Debt issuance incentives and creative accounting: Evidence from municipal mergers in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 68(C).
    5. Bury, Yannick & Feld, Lars P., 2020. "Fiscal federalism in Germany," Freiburg Discussion Papers on Constitutional Economics 20/4, Walter Eucken Institut e.V..
    6. Hitoshi Saito & Haruaki Hirota & Hideo Yunoue & Miki Miyaki, 2023. "Do municipal mergers internalise spatial spillover effects? empirical evidence from Japanese municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 70(2), pages 379-406, April.
    7. Zhang, Zhihe & Hou, Yufei & Zhang, Zesen & Li, Mulin, 2023. "Natural resources, carbon neutrality, and fiscal federalism: Implications for G7 countries amid rising Covid-19 concerns," Resources Policy, Elsevier, vol. 87(PA).

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