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| Abstract |
The fact that consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation presented in the theoretical literature. Neverthele...ss, previous studies provide little evidence of how public service spillovers affect boundary reform decisions. This study empirically tests the hypothesis that spillovers induce consolidation, by estimating the amount of spillovers from the demand function for public goods. Specifically, it uses voting data on local referenda in order to examine the relationship between consolidation preference and spillovers through identifying the preferences of individual jurisdictions. It is shown that municipalities that have suffered from large public good spillover effects prefer consolidation. Moreover, consistent with the findings in the theoretical and empirical literature, economies of scale, population size, differences in median income, and unconditional grants are found to influence the consolidation decision.show more
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DP2013-07