Author(s)

Katsuyoshi Nakazawa

Department of Economics, Toyo University, Tokyo, Japan.

Municipal amalgamation has been done in many countries in recent years as the result of a push to enlarge the size and coverage of local government units, which in turn is driven mainly by the prospect of economies of scale. However, while municipality amalgamation or boundary reform raises population size, it introduces organizational changes in the local government that might increase administrative inefficiency. The choice for the method of integration of administrative functions before amalgamation might affect to public expenditure after amalgamation. This study uses Japanese municipal-level data and argues for a relation between the choice for the method of integration of administrative functions and cost inefficiency after amalgamation. The results show that the fully distributed facility method is more likely to be adopted in a larger administrative jurisdiction and in one with large differences in finances or political structures between amalgamated sub-regions. Moreover, the results of stochastic frontier regression show that new municipality adopting fully distributed facility method can possibly increase inefficiency by expanding organizational slack because the new administration system will be insufficient integration of administrative functions.

Amalgamation; Administrative Functions; Multinomial Logistic Regression; Stochastic Frontier Regression; Local Public Expenditure

Nakazawa, K. (2014) Does the Method of Amalgamation Affect Cost Inefficiency of the New Municipalities?. Open Journal of Applied Sciences, 4, 143-154. doi: 10.4236/ojapps.2014.44015.