Common pool problems in voluntary municipal mergers

Tuukka Saarimaa, Janne Tukiainen

Research output: Contribution to journalArticleScientificpeer-review

40 Citations (Scopus)

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 languageEnglish
Pages (from-to)140-152
Number of pages13
JournalEuropean Journal of Political Economy
Volume38
DOIs
Publication statusPublished - 1 Jun 2015
MoE publication typeA1 Journal article-refereed

Keywords

  • Common pool
  • Difference-in-differences
  • Law of 1/n
  • Municipality mergers

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