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 9: Local government cooperation for joint provision: the experiences of Brazil and Spain with inter-municipal consortia

Luiz de Mello and Santiago Lago-Peñas

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


Local governments around the world strive to meet residents’ demands for goods and services in a cost-effective manner. Where local governments are small, they may be unable to exploit economies of scale in the production and delivery of services. At the same time, if the benefits of local provision spill over inter-jurisdictional borders while provision costs are internalized by local taxpayers, local governments may be discouraged from provision in the first place, which results in an undesirable, sub-optimal supply of services. One option for dealing with these difficulties is to consolidate local governments into larger units that would allow for scale effects to be maximized and benefit spillovers to be internalized within the providing jurisdiction. However, consolidations are often difficult to achieve, especially due to political resistance to mergers and amalgamations. Indeed, they may even be undesirable, if they run counter to the objective of bringing the government closer to the people, which usually facilitates social control over government operations and allows for information over local preferences and needs to be extracted more efficiently.

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