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Do municipal mergers reduce public expenditure? Evidence from the MTE approach

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  • Goto, Tsuyoshi

Abstract

This study examines whether municipal mergers reduce public expenditure by examining the marginal treatment effect (MTE) of municipal mergers. Extant papers in the literature have paid little attention to bias from self-selection among municipal mergers or to heterogeneity in the treatment effects of the mergers. Corresponding to these issues, we use the instrumental variables used in Miyazaki (2018) [Applied Economics, 50(10), pp. 1108-1121] and estimate the MTEs of the mergers. From the estimated MTEs, we construct several estimands, and we show that the municipal mergers resulted in an increase in public expenditure on average. Moreover, we confirm that the local average treatment effect (LATE) was quite large from FY2006 to FY2015, although it decreased suddenly in FY2016, when some incentives that promoted the mergers ended. This implies that the incentives offered by the national government negated the cost reductions resulting from the municipal mergers.

Suggested Citation

  • Goto, Tsuyoshi, 2022. "Do municipal mergers reduce public expenditure? Evidence from the MTE approach," MPRA Paper 114376, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114376
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    References listed on IDEAS

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    1. James J. Heckman & Vytlacil, Edward J., 2007. "Econometric Evaluation of Social Programs, Part II: Using the Marginal Treatment Effect to Organize Alternative Econometric Estimators to Evaluate Social Programs, and to Forecast their Effects in New," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 71, Elsevier.
    2. Clémence Tricaud, 2019. "Better alone? Evidence on the costs of intermunicipal cooperation," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2019-12-ccr, Condorcet Center for political Economy.
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    9. Blesse, Sebastian & Baskaran, Thushyanthan, 2016. "Do municipal mergers reduce costs? Evidence from a German federal state," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 54-74.
    10. 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).
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    More about this item

    Keywords

    Marginal treatment effect; Municipal merger; Cost reduction;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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