Abstract
We analyze free-riding behavior of Finnish municipalities prior to voluntary municipal mergers. The merger process creates a temporary common pool problem, because of a delay from the initial decision to the actual merger during which municipalities stay autonomous. Using a difference-in-differences strategy, we find that the stronger free-riding incentive a municipality faced the more it increased its debt and spent its cash reserves. These funds were spent mostly on investments and current expenditures.
Original language | English |
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Pages (from-to) | 140-152 |
Number of pages | 13 |
Journal | European Journal of Political Economy |
Volume | 38 |
DOIs | |
Publication status | Published - 1 Jun 2015 |
MoE publication type | A1 Journal article-refereed |
Keywords
- Common pool
- Difference-in-differences
- Law of 1/n
- Municipality mergers