Evidence on economies of scale in local public service provision: a meta-analysis

The standard theory of optimal jurisdictional size hinges importantly on the existence of economies of scale in the provision of local public goods and services. However, despite its relevance for forced local amalgamation programs and related policies, the empirical evidence on the existence of such economies of scale remains elusive. The main goal of this paper is to produce an updated and comprehensive quantitative review of the existence of economies of scale in the provision of local public goods using a meta-analysis approach to systematize the wide range of empirical approaches and modeling frameworks found in the previous literature. Our analysis confirms the presence of moderately increasing to constant returns to scale in the provision of local services across traditional local service sectors such as education, water and sanitation, and garbage collection. Overall, larger “client†bases do not reduce average costs of production in the delivery of most local public services beyond certain modest jurisdiction size which has been referred to in the literature as 10,000 residents. These findings have significant policy implications for countries considering jurisdictional consolidation programs.