Fragmentation, Fiscal Mobility, and Efficiency

Abstract

This article examines whether greater fragmentation in local government improves efficiency. Tiebout (1956) "exiting" is the general theoretical underpinning for the belief that fragmentation should improve efficiency. The article argues that previous evidence for the greater efficiency of fragmented government is weak because the complex nature of many local government systems is not consistent with the institutional structures supposed in the models and does not allow for simple testing. Using evidence from England where institutional structures more closely resemble those in the Tiebout model, efficiency is analyzed both at the jurisdictional and metropolitan level in a straightforward manner. No evidence for the supposed positive effects of fragmentation is found. Voice mechanisms may explain why fiscal mobility does not lead to efficiency in the fragmented system of metropolitan England.

Municipal relationship modifications by the Great Heisei Consolidation in Japan

“…Some mergers have resulted in increased expenditures per capita, while others in decreased expenditures or no significant changes. Some studies have rejected the benefits of people having the freedom to choose what community they wish to live in (Gonzalez & Mehay, 1987;Nelson & Foster, 1999;Dowding & Mergoupis, 2003;Kelleher & Lowery, 2002). Feiock (2004) argues that the reason why financial efficiency by consolidation does not necessarily become apparent is because there are many selective benefits varying in public officials, private business and resident interests, and their selective benefits are superior to administrative efficiency.…”

The politics of municipal fragmentation in Ghana

“…There is likely to be greater competition among multi-purpose governments that offer different bundles of services, compared to special-purpose governments that offer single types of services (Boyne 1998;Stansel 2006). Also, since many singlepurpose governments are established to provide capital-intensive services to a large population or area (for example, water provision or reclamation), their fragmentation creates diseconomies of scale (Dowding and Mergoupis 2003) -although this argument has limited application to Ghana where almost all local governments are multi-purpose sub-nationals. But even in Ghana, after more than two decades of continuous council fragmentation, competition among local governments has not materialised due to the small catchment area of many districts.…”

The Methodology of The Public Choice Research Programme: The Case Of ‘Voting With Feet’

“…They point out that no existing US study controls for these and argue that England, with a simpler structure of non-overlapping multi-purpose authorities and little variation in new public management practices between local authorities due to UK law, might be a better test case for the model. 21 There are two principal studies testing for Tiebout effects using micro-level data in England. The first examined mobility in four London boroughs in the period covered by the community charge; the second study used data from a 1997 survey of the three largest metropolitan areas in England.…”

“…The standard Tiebout logic -that increased fragmentation increases efficiency because it facilitates 'voting with feet' by expanding the jurisdictional choice set of mobile citizens -was thus reversed in this case. 23 These studies testing for Tiebout effects in the UK reveal a common difficulty in stating criteria for falsification in the empirical evaluation of models. 24 If no moving households take taxes and services into account when relocating, then clearly Tiebout effects are irrelevant and the market analogue that Tiebout proposes fails to hold.…”