This paper uses the Swedish municipal amalgamation reform of 1952 to study the common pool problem in politics. The amalgams were common pools and the municipalities had incentives to free-ride on their amalgam partners by increasing debt prior to amalgamation. We find that municipalities that merged in 1952 increased their debt between 1948 and 1952 when the reform could be anticipated. The increase amounted to 52% of new debt issued or 1.5% of total revenues in the merged municipalities. But contrary to the “law of 1/n”, free-riding did not increase in common pool size.

We analyse free-riding behaviour of Finnish municipalities prior to voluntary municipal mergers. The merger process creates a temporary common pool problem, because of a delay from the initial decision to the actual merger during which municipalities stay autonomous. Using a difference-indifferences strategy, we find that the stronger free-riding incentive a municipality faced the more it increased its debt and spent its cash reserves. These funds were spent mostly on investments and current expenditures. The results can be attributed to the "law of 1/n" rather than to responding to an anticipated loss of political power or voluntary transfers between merging municipalities. Besides providing a test of the law of 1/n, our results suggest that local jurisdiction mergers are likely to involve a substantial (one-time) cost due to free-riding. This leads to two policy implications. First, during a merger process, some financial constraints on the local level may be a good idea to mitigate common pool problems. Second, for the merger policy to achieve the goal of decreasing public spending without reducing service quality, the scale economies need to be fairly large. Our results should be of wider interest, not only because mergers are used extensively in various countries, but also because common pool problems are present in many other contexts, such as (local) governments bail outs.

This thesis contains three essays in public economics with a focus on regional and local governments. The first two chapters are concerned with effects and fiscal incentives linked to municipal mergers. The third chapter explores the importance of fiscal mechanisms for regional risk sharing and redistribution. The first chapter analyses whether municipal mergers result in efficiency gains. The analysis is based on 140 municipal mergers in Switzerland and provides no evidence for major efficiency improvements. Expenditure levels per capita remain largely unaffected. The only exception are net administration expenditures which decrease on average by around 40 Swiss francs per inhabitant. To approximate potential changes in the quantity or quality of local public services, I also analyse the effect of mergers on population growth and property prices. However, the results do not suggest any improvements of the quality of local public services either. Generally, the fiscal effects of municipal mergers receive much attention, while potential fiscal incentives of merging municipalities before the merger are often overlooked. Merging municipalities might be tempted to shift the cost of current expenditures to their merger partners by increasing net debt. In this sense the tax base of a municipality's merger partners can be seen as a temporary common pool for the time between the final merger decision and the actual merger. The second chapter therefore analyses the free-riding behaviour of more than 350 merging municipalities just before the respective merger is carried out. The results show that municipalities actually do on average increase net debt levels by more than non-merging municipalities. Thereby the extent of free-riding depends on the amount of time passing between the merger decision and the actual merger: the longer this common pool window exists, the more free-riding occurs. The third chapter analyses the importance of va.

Powerless under the country's constitution, Canadian municipal governments often find themselves in conflict with their provincial masters. In 2002, the Province of Quebec forcibly merged all cities on the Island of Montreal into a single municipality - a decision that was partially reversed in 2006. The first book-length study of the series of mergers imposed by the Parti Québécois government, The Merger Delusion is a sharp and insightful critique by a key player in anti-merger politics. Peter Trent, mayor of the City of Westmount, Quebec, foresaw the numerous financial and institutional problems posed by amalgamating municipalities into megacities. Here, he presents a stirring and detailed account of the battle he led against the provincial government, the City of Montreal, the Board of Trade, and many of his former colleagues. Describing how he took the struggle all the way to the Supreme Court of Canada, Trent demonstrates the ways in which de-mergers resonated with voters and eventually helped the Quebec Liberal Party win the 2003 provincial election. As the cost and pitfalls of forced mergers become clearer in hindsight, The Merger Delusion recounts a compelling case study with broad implications for cities across the globe.

This book introduces recent developments in both theoretical and empirical analyses of local public economics. Theories of those economics as well as empirical analyses have been developed dramatically in various directions in recent years. One direction has been to reflect real economic circumstances, especially in Japan. In the early 2000s, Japan experienced the so-called great merger (or consolidation) of municipalities in the Heisei era (1999 through the present), with the number of municipalities shrinking from 3,232 to 1,821 for increasing administrative and financial efficiency. This phenomenon is mainly due to a drastic change in demography in Japan: the dimishing birthrate and aging population. Following the consolidation, regional coordination has been undertaken to raise overall administrative and financial efficiency. In sum, various types of public policies for tackling the decreasing birthrate and aging population have been carried out. Urban sprawl and the timing of municipal mergers are dealt with from a broad point of view, and public child care services and tax competition are investigated from a policy standpoint. Another direction has been to incorporate new ideas for forming theoretical frameworks for local public finance, most of which have been based on static situations. In the recent trend toward globalization, local governments have attended not only to the welfare of residents but also to the interests of regional economic development. In addition, decision making by local governments has tended to be affected by political activities. Thus, the endogenous growth setting and lobbying activities for the activities of local governments are discussed in the book. With these new directions for analyses, the author tackles the topics of tax competition, cross-border shopping, local provision of public goods, and soft budgets, thus covering a broad range of aspects of local public finance.

This report provides an overview of “multi-level governance” reforms in OECD countries. It includes case studies on Finland, France, Italy, Japan and New Zealand.