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Vertical consolidation and financial sustainability: evidence from English local government

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  • Rhys Andrews

Abstract

Proponents of the vertical consolidation of lower-tier units into a smaller number of single-tier local governments suggest that it improves the financial sustainability of governments by generating economies of scale and scope. However, critics suggest that such structural change is beset with disruptive and unanticipated costs that outweigh any potential efficiency savings. I investigate the validity of these contrasting arguments by analysing the expenditure and fiscal health of English county councils before and after the consolidation of the lower-tier units within several counties that took place in 2009. Levels of financial sustainability are modelled using a difference-in-difference estimator for the years 2003–2012. The results suggest that in the short run the consolidated governments have been able to realize administrative economies, but their fiscal health has weakened. These findings appear to be robust to the possibility of selection effects. Theoretical and practical implications are discussed.

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  • Rhys Andrews, 2015. "Vertical consolidation and financial sustainability: evidence from English local government," Environment and Planning C, , vol. 33(6), pages 1518-1545, December.
    • Handle: RePEc:sae:envirc:v:33:y:2015:i:6:p:1518-1545
    DOI: 10.1177/0263774X15614179
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    References listed on IDEAS

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    1. María Deseada López Subires & Laura Alcaide Muñoz & Andrés Navarro Galera & Manuel Pedro Rodríguez Bolívar, 2019. "The Influence of Socio-Demographic Factors on Financial Sustainability of Public Services: A Comparative Analysis in Regional Governments and Local Governments," Sustainability, MDPI, vol. 11(21), pages 1-18, October.

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