Examining the relationship between municipal consolidation and cost reduction: an instrumental variable approach

研究成果: ジャーナルへの寄稿記事

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This study explores the cost-reduction effects of local government consolidation, using data from Japanese municipalities. We use municipal panel data from Japan for the years 2000, 2005 and 2010, a data set including numerous consolidation cases. Reverse causality between consolidation decisions and size of municipal expenditure is a concern in the voluntary consolidation of local governments. An instrumental variable (IV) methodology is employed to deal with possible endogeneity associated with consolidation decisions. The main finding is that municipal current expenditure per capita increases immediately after consolidation, but then gradually declines. Because consolidation seems to increase per capita expenditure in the absence of the effect of this long-term declining trend, incorporating this trend into estimation is crucial in cost-efficiency analysis of consolidation. It is also shown that conventional panel data regressions yield biased consolidation effects, suggesting the superiority of the IV approach.

元の言語英語
ページ(範囲)1108-1121
ページ数14
ジャーナルApplied Economics
50
発行部数10
DOI
出版物ステータス出版済み - 2 25 2018

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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