IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/76833.html
   My bibliography  Save this paper

Does municipal mergers internalize spatial spillover effects? Empirical evidence from Japanese municipalities

Author

Listed:
  • Saito, Hitoshi
  • Hirota, Haruaki
  • Yunoue, Hideo
  • Miyaki, Miki

Abstract

This paper investigates whether municipal mergers could internalize spatial spillover effects by comparing mergers before and after they occur, especially focusing on local public library services in Japan. A spatial spillover effect occurs when the benefit of a local public service spreads across not only its own administrative district but also into neighboring ones. A free rider problem among municipalities might be caused when a municipality makes a policy decision regarding how much it supplies to its own local public service under a decentralization system, recognizing the existence of a spatial spillover effect. Under such circumstances, spatial spillover effects might be internalized through municipal mergers. In Japan, the boundaries of administrative districts—including those of municipalities—have been determined based on traditional or historical reasons. However, large-scale municipal mergers took place in FY2004 and FY2005 due to serious fiscal deficits and a rapidly aging population. Consequently, the number of municipalities in Japan has decreased from 3,232 to 1,820. In light of these facts, we examine whether municipal mergers internalize spatial spillover effects, focusing on Japanese local public library services, by applying cross-sectional spatial autoregressive models. As a result, we found that there are spatial spillover effects in public library services both in FY2001 (before) and in FY2008 (after). We also found that the impact of such spillovers in FY2008 is smaller than that in FY2001. The results imply that municipal mergers could at least partially internalize spatial spillover effects among municipalities.

Suggested Citation

  • Saito, Hitoshi & Hirota, Haruaki & Yunoue, Hideo & Miyaki, Miki, 2017. "Does municipal mergers internalize spatial spillover effects? Empirical evidence from Japanese municipalities," MPRA Paper 76833, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:76833
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/76833/1/MPRA_paper_76833.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher Hammond, 2002. "Efficiency in the provision of public services: a data envelopment analysis of UK public library systems," Applied Economics, Taylor & Francis Journals, vol. 34(5), pages 649-657.
    2. Johan Lundberg, 2006. "Spatial interaction model of spillovers from locally provided public services," Regional Studies, Taylor & Francis Journals, vol. 40(6), pages 631-644.
    3. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 397-412, July.
    4. Akihiko Kawaura, 2010. "Self-Serving Mayors and Local Government Consolidations in Japan," Working Papers 201014, University of Hawaii at Manoa, Department of Economics.
    5. Hirota, Haruaki & Yunoue, Hideo, 2017. "Evaluation of the fiscal effect on municipal mergers: Quasi-experimental evidence from Japanese municipal data," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 132-149.
    6. Sole-Olle, Albert, 2006. "Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain," Journal of Urban Economics, Elsevier, vol. 59(1), pages 32-53, January.
    7. Henrik Jordahl & Che-Yuan Liang, 2010. "Merged municipalities, higher debt: on free-riding and the common pool problem in politics," Public Choice, Springer, vol. 143(1), pages 157-172, April.
    8. Katsuyoshi Nakazawa, 2016. "Amalgamation, free-rider behavior, and regulation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 812-833, October.
    9. Takeshi Miyazaki, 2014. "Municipal consolidation and local government behavior: evidence from Japanese voting data on merger referenda," Economics of Governance, Springer, vol. 15(4), pages 387-410, November.
    10. Niklas Hanes, 2002. "Spatial Spillover Effects in the Swedish Local Rescue Services," Regional Studies, Taylor & Francis Journals, vol. 36(5), pages 531-539.
    11. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    12. DeBoer, Larry, 1992. "Economies of scale and input substitution in public libraries," Journal of Urban Economics, Elsevier, vol. 32(2), pages 257-268, September.
    13. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
    14. 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.
    15. Donald F. Vitaliano, 1997. "X-Inefficiency in the Public Sector: the Case of Libraries," Public Finance Review, , vol. 25(6), pages 629-643, November.
    16. Sune Welling Hansen, 2014. "Common pool size and project size: an empirical test on expenditures using Danish municipal mergers," Public Choice, Springer, vol. 159(1), pages 3-21, April.
    17. Nobuo Akai & Miki Suhara, 2013. "Strategic Interaction Among Local Governments in Japan: An Application to Cultural Expenditure," The Japanese Economic Review, Japanese Economic Association, vol. 64(2), pages 232-247, June.
    18. Miles M. Finney & Mann J. Yoon, 2003. "Asymmetric Interdependence in the Provision of a Local Public Good: An Empirical Examination," Public Finance Review, , vol. 31(6), pages 648-668, November.
    19. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
    20. Baicker, Katherine, 2005. "The spillover effects of state spending," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 529-544, February.
    21. Katsuyoshi Nakazawa & Tomohisa Miyashita, 2014. "Municipality amalgamation in Japan: an examination using event history analysis," Economics Bulletin, AccessEcon, vol. 34(2), pages 627-633.
    22. Andrew F. Haughwout, 1999. "Regional fiscal cooperation in metropolitan areas: An exploration," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 18(4), pages 579-600.
    23. Gordon, Nora & Knight, Brian, 2009. "A spatial merger estimator with an application to school district consolidation," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 752-765, June.
    24. James C. Murdoch & Morteza Rahmatian & Mark A. Thayer, 1993. "A Spatially Autoregressive Median Voter Model of Recreation Expenditures," Public Finance Review, , vol. 21(3), pages 334-350, July.
    25. Figlio, David N. & Kolpin, Van W. & Reid, William E., 1999. "Do States Play Welfare Games?," Journal of Urban Economics, Elsevier, vol. 46(3), pages 437-454, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Masayoshi Hayashi & Wataru Yamamoto, 2017. "Information sharing, neighborhood demarcation, and yardstick competition: an empirical analysis of intergovernmental expenditure interaction in Japan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 134-163, February.
    3. Hirota, Haruaki & Yunoue, Hideo, 2017. "Evaluation of the fiscal effect on municipal mergers: Quasi-experimental evidence from Japanese municipal data," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 132-149.
    4. Fernando A. López & Pedro J. Martínez-Ortiz & Juan-Gabriel Cegarra-Navarro, 2017. "Spatial spillovers in public expenditure on a municipal level in Spain," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(1), pages 39-65, January.
    5. Massimiliano Ferraresi & Umberto Galmarini & Leonzio Rizzo, 2018. "Infrastructure spillovers and strategic interaction: does the size matter?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(1), pages 240-272, February.
    6. Hirota, Haruaki & Yunoue, Hideo, 2020. "Public investment and the fiscal common pool problem on municipal mergers in Japan," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 124-135.
    7. Edmark, Karin, 2007. "Strategic competition in Swedish local spending on childcare, schooling and care for the elderly," Working Paper Series 2007:22, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Wang, Jia, 2018. "Strategic interaction and economic development incentives policy: Evidence from U.S. States," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 249-259.
    9. Blesse Sebastian & Rösel Felix, 2017. "Was bringen kommunale Gebietsreformen?: Kausale Evidenz zu Hoffnungen, Risiken und alternativen Instrumenten," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 18(4), pages 307-324, November.
    10. 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.
    11. Sole-Olle, Albert, 2006. "Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain," Journal of Urban Economics, Elsevier, vol. 59(1), pages 32-53, January.
    12. Tsuyoshi Goto & Genki Yamamoto, 2018. "Creative Accounting and Municipal Mergers -A Theoretical and Empirical Approach-," OSIPP Discussion Paper 18E012, Osaka School of International Public Policy, Osaka University.
    13. J. Sebastian Leguizamon & Casto Martin Montero Kuscevic, 2019. "Party Cues, Political Trends, And Fiscal Interactions In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 600-620, October.
    14. John I. Carruthers & Gudmundur F. Úlfarsson, 2008. "Does `Smart Growth' Matter to Public Finance?," Urban Studies, Urban Studies Journal Limited, vol. 45(9), pages 1791-1823, August.
    15. Björn Kauder, 2016. "Incorporation of municipalities and population growth: A propensity score matching approach," Papers in Regional Science, Wiley Blackwell, vol. 95(3), pages 539-554, August.
    16. Nakazawa, Katsuyoshi, 2024. "Identifying Municipality Discretion Using a Quasi-Experimental Approach: The Case of Eligibility Assessments for Japan’s Long-Term Care Insurance Program," MPRA Paper 120911, University Library of Munich, Germany.
    17. Takeshi Miyazaki, 2018. "Internalization of externalities and local government consolidation: empirical evidence from Japan," Empirical Economics, Springer, vol. 54(3), pages 1061-1086, May.
    18. Hélia Silva & Linda Gonçalves Veiga & Miguel Portela, 2011. "Strategic Interaction in Local Fiscal Policy: Evidence from Portuguese Municipalities," NIPE Working Papers 23/2011, NIPE - Universidade do Minho.
    19. Masayoshi Hayashi & Takafumi Suzuki, 2018. "Municipal Mergers and Capitalization: Evaluating the Heisei Territorial Reform in Japan," CIRJE F-Series CIRJE-F-1105, CIRJE, Faculty of Economics, University of Tokyo.
    20. Agrawal, David R., 2016. "Local fiscal competition: An application to sales taxation with multiple federations," Journal of Urban Economics, Elsevier, vol. 91(C), pages 122-138.

    More about this item

    Keywords

    spatial spillover effect; municipal mergers;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:76833. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.