Template-type: ReDIF-Paper 1.0

Author-Name: Miriam Hortas-Rico
Author-Email:  miriam.hortas@uam.es
Author-Workplace-Name: Department of Economics and Public Finance, The Autonomous University of Madrid & Governance and Economics research Network (GEN)

Author-Name: Vicente Rios
Author-Email: vicente.rios@unavarra.es
Author-Workplace-Name: Department of Economics, Public University of Navarre

Title: Is there an Optimal Size for Local Governments? A Spatial Panel Data Model Approach

Abstract: The paper presents a framework for determining the optimal size of local jurisdictions. To that aim, we first develop a theoretical model of cost efficiency that takes into account spatial interactions and spillover effects among neighbouring jurisdictions. The model solution leads to a Spatial Durbin panel data specification of local spending as a non-linear function of population size. The model is tested using local data over the 2003-2011 period for two aggregate (total and current) and four disaggregate measures of spending. The empirical findings suggest a U-shaped relationship between population size and the costs of providing public services that varies depending on (i) the public service provided and (ii) the geographical heterogeneity of the territory.
Length: 41 pages 

Creation-Date: 2018-02

File-URL: http://icepp.gsu.edu/files/2018/02/paper1807.1.pdf
File-Format: application/pdf

Handle: RePEc:ays:ispwps:paper1807