Asymmetric Local Government Consolidations with Heterogeneous Local Public Goods

Abstract

This paper analyzes the consolidation of asymmetric local governments. When a small district merges into a larger one, the consolidating government can provide a higher level of public services. Normally, residents in large districts favor consolidation while residents in small district oppose it. This paper shows a condition in which desirable consolidation is realized. The result is that only when fixed costs exist within which the public good is produced after consolidation and the commuting cost is very low, is consolidation realized. In an alternate case, consolidation does not occur although it is desirable.