The Challenge of Local Government Size

The Challenge of Local Government Size

Theoretical Perspectives, International Experience and Policy Reform

Studies in Fiscal Federalism and State–local Finance series

Edited by Santiago Lago-Peñas and Jorge Martinez-Vazquez

Expert contributors in economics and political science offer a comprehensive breakdown of the issue of local jurisdiction fragmentation and provide recommendations for successful policy reform. Topics discussed include economies of scale, the costs and benefits of voluntary and forced amalgamation programs, the correlation between government size and corruption, privatization, and inter-municipal cooperation. A combination of theory and empirical evidence provides depth and makes this book an invaluable addition to the literature.

Chapter 4: Corruption and the size of local governments: are they related?

Michael A. Nelson

Subjects: economics and finance, public sector economics, politics and public policy, public policy


Corruption of government officials has attracted the interest of economists for more than three decades. Two major strands have evolved from the literature over that time period, one dealing with how corruption influences economic performance and the other focusing on identifying what factors and institutional arrangements deter corrupt behavior. Our understanding of both has been aided by the recent introduction of measures of perceived or experienced corruption for individual countries. The availability of these data has led a substantial body of empirical work addressing various issues in both strands of the literature. Separately, there has been a movement globally towards more decentralized government structures with the promise that this will lead to improved accountability on the part of public officials and greater efficiency in the delivery of government services (World Bank, 1999, Chapter 5; Arzaghi and Henderson, 2005). These decentralization initiatives have taken several forms including the devolution of spending and tax authority to subnational governments (fiscal decentralization), and, in some cases, an increase in the number of subnational units of government with the goal of promoting competition among these suppliers of government services.

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