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Abstract
Functional advantages and drawbacks are commonly mentioned to rationally justify or condemn municipality amalgamations. However, many consolidation projects are resisted by local governments or citizens on the grounds that amalgamation would dampen local identity. A municipality’s name change is probably the most visible sign of the loss of community bond experienced by citizens at amalgamation time. This article aims to put a value on this loss by measuring citizen willingness to pay for their city name. This methodological approach innovates upon the literature on municipal amalgamation and place branding by exploiting the versatility of the so-called contingent valuation method (CVM). CVM confronts respondents, in a survey setting, with a hypothetical market in which a characteristic of interest is exchanged. Here the characteristic is the possibility to retain one’s city name for an amalgamated jurisdiction. The article presents the estimates provided by a survey conducted in four Swiss cities.
Acknowledgements
We thank the interviewers who conducted the survey and all the respondents who took the time to answer them. For comments on an earlier draft we are indebted to seminar participants on various occasions, to two anonymous reviewers and to Michelle Bailat-Jones for her editing assistance.
Notes
1. In 2013, the Swiss Federal Statistical Office reported 2,396 municipalities with an average population of 3,397 inhabitants. The median size was 1,312 inhabitants. The gap between the average and the median shows that many Swiss municipalities are tiny. Only 147 municipalities are statistically considered cities (by having a population greater than 10,000).
2. The full questionnaire and the database can be obtained by contacting the authors.
3. See Champ, Boyle, and Brown (Citation2003) for a description of the most commonly used nonmarket valuation techniques.
4. In the first pair, Montreux (25,199 inhabitants in 2012) is, however, bigger than Vevey (18,364) and, in the second pair, La Chaux-de-Fonds (37,843) is bigger than Le Locle (10,077). Each pair is located within a single agglomeration area. The respective financial positions are somehow diverse. In 2012, at the time of the survey, Montreux was the least indebted municipality with a 10% ratio of its gross debt to its operating revenue, compared to 144% for Vevey, 173% for La Chaux-de-Fonds and 108% for Le Locle. An amalgamation project has been under discussion between Montreux and Vevey, together with eight other municipalities, since 2011. At the time of writing, the project is in a technical phase with experts looking for answers to the various issues to be addressed (land-use planning, economic development, taxation and finance, etc.). Between 2003 and 2007, a possible merger between La Chaux-de-Fonds and Le Locle was designed by the executive branch of the two municipalities. An information campaign was launched together with an opinion poll. Eventually the executive branch of Le Locle decided to pull back. Both projects have benefited from a pretty extensive coverage by the local press. Newspapers still conjecture on future amalgamation from time to time.
5. The wording of the scenario is given as if the respondent was a resident of Montreux. In case the respondent was a resident of Vevey, the wording was adapted accordingly by swapping the name Montreux with Vevey. As for the amalgamation project between LL and LCH, the wording was adapted accordingly to reflect the respondent’s residency. The scenario is of course hypothetical. In reality, after an amalgamation takes place the new municipality can be named after either of the pre-existing jurisdictions or with a totally different name. Anyway it is not possible to speculate over the name that would be chosen in case the merger ever happens. Some would argue that the name ‘Montreux’ is more well-known than ‘Vevey’ and that the name ‘La Chaux-de-Fonds’ than ‘Le Locle’. But it does not mean that the most famous name would be retained. Indeed, as will become clear in next sections, the elicited WTP is not necessarily higher for the name of Montreux or La Chaux-de-Fonds, compared to the one for Vevey or Le Locle.
6. Admittedly, there is no CHF 500 banknote. However, the gap between CHF 200 and CHF 1,000 was too large and needed to be bridged. CHF stands for Swiss francs. At the time of writing, € and CHF were almost at parity. However, when the survey was carried out, 1 € was worth 1.2 CHF.
7. 58 respondents actually chose to refine their choice.
8. The various tests we conducted on preliminary versions of the questionnaire dissuaded us from providing the respondent with additional details via the scenario, especially to take into account respondent cognitive capacities. For instance, no additional information was provided regarding the payment vehicle (tax, fee, bill, etc.) or the way the paid amounts would be redistributed. This has the notable advantage that the scenario remains neutral with respect to the good to be valued, i.e. the municipality name. Indeed we are most interested in the unbiased value of the name. Information about how payment collection, to whom it goes and so on may have influenced the respondent and thus biased the stated WTP. See Mitchell and Carson (Citation1989, 2016–2017).
9. Young people often only possess a mobile phone and are rarely registered in the phonebook.
10. This kind of bias arises because of the hypothetical situation respondents are facing in a CV survey, when respondents report a WTP that exceeds the amount they would actually pay if the market really existed.
11. The distribution is significantly different according to the Kolmogorov–Smirnov test.
12. There is a significant difference at the 0.05 significance level between M and LCF according to Bonferroni (0.035), Scheffe (0.054) and Sidak (0.034) test.
13. There is a significant difference at the 0.05 level between M and V according to Bonferroni (0.049) and Sidak (0.034) tests (note that here Scheffe test is not significant at the 0.05 level).
14. For example, when the last suggested bid, say CHF 10, was accepted and when the participants refined the value to CHF 12, then the reported WTP is CHF 12.
15. Some indifferent respondents might prefer the name of the other municipality. Thus they may have an even smaller interest in the name of their municipality than those who simply do not care.
16. The relevance of the choice of a log-linear specification was checked by running a Box–Cox transformation. The log-linear specification is situated with a 95% probability in the interval provided by the computed Box–Cox model. A value of CHF 1 is added to all reported WTPs to avoid zeros (Mitchell and Carson Citation1989, 372).
17. All Variance Inflation Factors (VIF) are by far smaller than 10.
18. The formula provided by the legislation foresees a transfer of CHF 250 per person. This amount is then multiplied by the size of the population and then capped at a maximum of 3,000 inhabitants whatever the actual number of inhabitants. It is also multiplied by an incentive factor that increases with the number of amalgamating municipalities. In case of two jurisdictions, the factor is 1.5. Therefore, should M and V amalgamate, they would receive a transfer of CHF 1.125 million (= 250 × 3000 × 1.5).
Additional information
Notes on contributors
Nils Soguel
Nils Soguel is a professor of Public Finance at the Swiss Graduate School of Public Administration – IDHEAP (University of Lausanne, Switzerland). He is also the chairman of the Swiss Public Sector Financial Reporting Advisory Committee. His research interests include public sector financial management, fiscal policy, fiscal federalism and valuation of nonmarket goods. He has written, co-authored or edited several books along with numerous articles in professional journals.
Julie Silberstein
Julie Silberstein is a research fellow in public administration at the University of Lausanne. Her research interests include political sciences, amalgamations, identification to local municipalities and valuation of nonmarket goods. A previous article on municipal mergers with Soguel entitled ‘Ex-Post Survey on the Consequences and Perceptions about Amalgamation’ appeared in Urban Public Economics Review (Vol.16, Citation2012).