Internalization of externalities and local government consolidation

empirical evidence from Japan

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The fact that jurisdictional consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation in the theoretical literature. Nevertheless, previous studies provide little evidence of how public service spillover effects influence consolidation decisions. This study empirically tests the hypothesis that spillovers induce consolidation, using voting data on the consolidation of Japanese municipalities. The extent of spillovers is measured by estimating the demand function for public goods with externalities. It is found that residents of the municipalities that can internalize a large amount of public goods spillovers through municipal consolidation tend to favor consolidation. This result supports the theoretical inference that spillovers in local public goods affect utility gains from jurisdiction integration, thus serving as one of the key impetuses for boundary reform. Moreover, after controlling for the spillover effects, economies of scale, population share, differences in median income, and unconditional grants can help explain consolidation preference.

Original languageEnglish
Pages (from-to)1061-1086
Number of pages26
JournalEmpirical Economics
Volume54
Issue number3
DOIs
Publication statusPublished - May 1 2018

Fingerprint

Externalities
internalization
Consolidation
Japan
consolidation
evidence
local public
municipality
Public Services
Evidence
Government
Empirical evidence
Internalization
Local government
difference in income
Voting
public service
grant
voting
jurisdiction

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

Internalization of externalities and local government consolidation : empirical evidence from Japan. / Miyazaki, Takeshi.

In: Empirical Economics, Vol. 54, No. 3, 01.05.2018, p. 1061-1086.

Research output: Contribution to journalArticle

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