Merging county administrations – cross-national evidence of fiscal and political effects

ABSTRACT

While many central governments amalgamate municipalities, mergers of larger county administrations are rare and hardly explored. In this article, we assess both fiscal and political effects of county mergers in two different institutional settings: counties act autonomously as upper-level local governments (Germany), or counties being decentralised branches of the state government (Austria). We apply difference-in-differences estimations to county merger reforms in each country. In both cases, some counties were amalgamated while others remain untouched. Austrian counties (Bezirke) and German counties (Landkreise) widely differ in terms of autonomy and institutions, but our results are strikingly similar. In both cases, we neither find evidence for cost savings nor for staff reductions. Instead, voter turnout consistently decreases in merged counties, and right-wing populists seem to gain additional support. We conclude that political costs clearly outweigh fiscal null benefits of county merger reforms – independent of the underlying institutional setting.

KEYWORDS:

• County mergers
• local government
• expenditures
• local elections
• voter turnout

Acknowledgments

The authors wish to thank Editor Marc Esteve, the two anonymous referees and Niklas Potrafke for helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Bird and Slack (2013).

2. Internalization of spatial externalities (spill-over) might be another reason for merger reforms. Spill-over may cause an underprovision of publicly provided goods. Mergers may then lead to an increase in expenditures. Spill-over, however, do not play a major role in the discussion of merger reforms in Germany which were always intended to cut spending.

3. Austria increased the number of districts for two main reasons. First, after Nazi Germany annexed Austria in 1938, few districts were merged. In the 1950s, the Austrian government re-established those districts. Second, Austria experienced a large increase in population after WWII from around 7 million inhabitants in 1950 to around 8.5 million today. Therefore, some districts were split – for example, in the booming West Austrian state of Vorarlberg (district of Dornbirn).

4. Blesse and Roesel (2017) provide a comprehensive overview on the literature on municipal merger reforms. There are also studies that do not use quasi-experimental methods such as difference-in-differences estimations (for example, Hanes 2015). We abstract from the results of these studies because they do not offer a causal interpretation.

5. Swianiewicz and Łukomska (2017) recently study splits of Polish counties and find that smaller counties lead to an increase in administrative costs but not in other budgetary category in the Polish case. There are also studies on mergers of special-purpose jurisdictions such as school districts (Brasington 1999; Duncombe and Yinger 2007; Knight and Gordon 2008).

6. With the exception of the state Schleswig-Holstein, county administrators are directly elected in all German states.

7. The draft of the reform act includes a full description of the merger process (see Entwurf eines Kommunalneugliederungsgesetzes (KngG), Drs. 4/2182).

8. In 2004/2005, the state government also merged municipalities. We abstract from this the merger reform which affected municipalities of all counties.

9. Volksstimme.de, Umfrage: Kreisgebietsreform stößt auf geteiltes Echo, https://www.volksstimme.de/sachsenanhalt/umfrage-kreisgebietsreform-stoesst-auf-geteiltes-echo/1491928053000. In another German state, Mecklenburg-West Pomerania, poll data show that around 69% of all respondents opposed district mergers that were enacted in 2011. Also 69% of all respondents do not believe in cost savings and 72% do not believe that the local administration will get closer to the people. Thus, people anticipated fiscal null effects while politicians widely believed in cost savings. See Kommunal.de, Gebietsreformen bringen Unmut, https://kommunal.de/artikel/gebietsreformen-umfragen/.

10. Mitteldeutsche Zeitung online, Kreisreform im Jahr 2007 in Sachsen-Anhalt hat kein Geld gespart – Verwaltung sogar teurer, https://www.mz-web.de/sachsen-anhalt/kreisreform-2007-umstrittene-fusionen-sparen-kein-geld—verwaltung-sogar-teurer-25014952.

11. In 2015, the state government also merged municipalities. We abstract from this the merger reform which affected municipalities of all counties. See Roesel (2016).

12. See ORF.at, Bezirksfusionen bringen Millioneneinsparungen, http://steiermark.orf.at/news/stories/2816748/.

13. These are DVU, DSU, Republikaner, DP, NPD, Offensive D, and AfD.

14. See Landesrechnungshof Steiermark, Bezirkshauptmannschaften, LRH 10 B 3/2005–16. Amt der Steiermärkischen Landesregierung, Stellenplan 2017, A5 Personal. Staff in nursing homes and other social institutions included.

15. FPÖ, BZÖ, and Team Stronach.

16. German state officials did not carry out or commissioned a reform evaluation for decades. Instead, officials argue that responsibilities of counties changed; pre- and post-reform figures were therefore not comparable (see, for example, Mitteldeutsche Zeitung, 10 Jahre Gebietsreform: Rosenhochzeit im Saalekreis ohne Liebe?, https://www.mz-web.de/merseburg/10-jahre-gebietsreform-rosenhochzeit-im-saalekreis-ohne-liebe–25137234). We account for changes in responsibilities because we compare merged to non-merged counties that both experienced the same changes in responsibilities.

Additional information

Funding

This work was supported by the Deutsche Forschungsgemeinschaft [SFB 884 and grant number 400857762].

Notes on contributors

Sebastian Blesse

Sebastian Blesse is a PhD student at the ZEW Mannheim and the University of Frankfurt. His research interests include fiscal federalism (e.g., administrative border reforms), empirical taxation, attitudes towards public policy and political economy.

Felix Roesel

Felix Roesel is a post-doctoral researcher at the Dresden branch of the ifo Institute. His research activities focus on public economics, health economics and political economy. In particular, he is interested in the determinants of the global rise of right-wing populism.