Abstract
This paper investigates whether the large scale municipal amalgamations in the German state of Baden-Wuerttemberg in the early 1970s led to considerable common pool exploitation. Through amalgamation the resources of several municipalities are pooled together disclosing the former independent municipalities a larger source of funds. Additionally, the pooling also decreases the cost of local public goods, as those have to be borne by the whole of the amalgamated municipality. By exploiting the huge variance in the amalgamation process in terms of number of participating municipalities, but also in municipality size or amalgamation strategy, we identify considerable common pool effects. Amalgamated municipalities show considerably stronger acceleration in debt accumulation compared to non-amalgamating municipalities. This common pool exploitation is stronger if more municipalities participate and when municipalities amalgamate by annexation.
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Notes
This form of electoral mechanism is called pseudo district election (Unechte Teilortwahl). While parties set up lists with candidates for the whole municipality in those who do not allow for district representation, they set up separate lists for each district when it is allowed. In the latter case, voting for candidates on the district lists is not restricted to the eligible voters in the specific districts. All eligible voters in the municipality are able to cast votes for these candidates. To illustrate the working properties of the voting mechanism consider municipality M which was formed by an amalgamation of the municipalities A and B. A and B also form the districts in the new municipality. For council elections, parties X and Y can set up lists \(X_{A}\) and \(Y_{A}\) for district A and \(X_{B}\) and \(Y_{B}\) for district B. Voters living in district A who want to vote for party X can cast votes for candidates on list \(X_{A}\) as well as \(X_{B}\). Because the lists are open, they can also cast votes for candidates of different parties, e.g., of lists \(X_{A}\) and \(Y_{B}\). Of course, the same is also possible for eligible voters of district B.
Primo and Snyder (2008), in an extension of the standard Weingast et al. (1981) model, question these results and show that the 1/n mechanism only holds when certain assumptions are fulfilled. Especially when congestion in the use of public goods and deadweight costs of taxation are considered the effect of the law of 1/n is diminishing and can even be reversed. The same result is derived, when partial cost sharing, instead of total cost sharing is used (Primo and Snyder 2008). However, the extensions are not relevant when we apply the common pool reasoning in the institutional setting of Baden-Wuerttemberg, because total cost sharing applies.
For an elaborate discussion about the merits and downsides of vote trading see Mueller (2003).
An empirical investigation of pre-amalgamation effects in Baden-Wuerttemberg did not find any indication for common pool exploitation (Fritz 2016).
Although common pool effects have also been detected at large elections (Bradbury and Stephenson 2003), it is not straightforward how they come about.
As a robustness test we also included measures of political fractionalization as described in Alesina et al. (1999) as additional explanatory variables. The inclusion of these variables does not affect the results. Results are available from the authors upon request.
The inverse indicator provides a measure for the incentives for each municipality to exploit the common pool as it indicates the size of the pool to exploit. Incentives are a decreasing function of the indicator, i.e., incentives rise when the indicator is lower. However, using this indicator is only useful when behavior of pre-amalgamation municipalities is investigated. When focusing on post-amalgamation effects one can only use the number of participating municipalities as proxy for common pool exploitation, because it indicates the possibilities for logrolling.
See Fritz (2015) for an extensive discussion of the problem of endogeneity of the amalgamation decision.
Although there exist two unincorporated areas (Gutsbezirk Muensingen and Rheinau/France) only the first is included in the dataset provided by the Office of Statistics.
Staig amalgamated in 1976 and Eigeltingen in 1977. Unfortunately, we were not able to figure out why they amalgamated after 1975. Including them does not alter the results.
Excluded are Baden-Baden, Freiburg im Breisgau, Heidelberg, Heilbronn, Karlsruhe, Mannheim, Pforzheim, Stuttgart and Ulm.
To get the number of treated municipalities one has to subtract 453, which is the number of municipalities in the control group, from “Number of Municipalities” as depicted in the regression table.
In this section we abstain from also introducing the number variable, because the effect seems to be driven by the fraction of forced municipalities. In this context the number of participants provides no additional information.
In general, this happened when a small municipality was annexed very early in the process and the municipality merged with others later on.
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Appendix
Appendix
See Fig. 5 and Tables 8, 9, 10, 11 and 12.
Per capita debt before amalgamation. The graph illustrates the development of the per capita debt level separately for every number of participating municipalities. The graph depicts the development in the years before the amalgamation date. Zero notes the amalgamation date
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Fritz, B., Feld, L.P. Common pool effects and local public debt in amalgamated municipalities. Public Choice 183, 69–99 (2020). https://doi.org/10.1007/s11127-019-00688-2
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DOI: https://doi.org/10.1007/s11127-019-00688-2