Is Amalgamation the Path to Sustainable Local Government Finance?

By Joel Tamosiunas, Elisabeth Gugl, Brad Hackinen and David Scoones.

Published by The International Journal of Sustainability Policy and Practice

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Article: Print $US10.00
Article: Electronic $US5.00

The issues of municipal amalgamation and sustainability are closely related, but the link is not always clear. There is a substantial body of literature examining whether the consolidations of local governments rectify unsustainable paths. However, much of this empirical research suffers from methodological oversights which may yield misleading conclusions about the effectiveness of these political restructurings. The most egregious errors are a failure to appropriately account for the behaviour of economic variables, and a tendency to select indicators which may not be representative of the true or most relevant effects of the amalgamation (e.g. there is often an overemphasis on factors such as cost-savings). We use a simple example to show that public good spillover effects combined with an inability to raise revenues may put urban centres on unsustainable financial paths. In recognition of this, it is essential to find cooperative structures which enable the provision of an efficient level of public goods, while ensuring the contribution of surrounding regions. Given the political penchant for resorting to amalgamation as a solution, it is important to determine whether or not this is an effective tool for cooperation. This paper advocates taking a more rigorous and contextual empirical approach which focuses on dynamic aspects and answering questions such as: does the amalgamation increase economic activity, make the region a more attractive place to live, enable the region to collect sufficient revenues to meet expenditure requirements, and maintain a vibrant and functional downtown area?

Keywords: Interjurisdictional Tax Competition, Regional Public Goods, Coordination among Jurisdictions, Amalgamation

The International Journal of Sustainability Policy and Practice, Volume 8, Issue 2, pp.117-129. Article: Print (Spiral Bound). Article: Electronic (PDF File; 1.027MB).

Joel Tamosiunas

Master Student, Economics, University of Victoria, British Columbia, Canada

Dr. Elisabeth Gugl

Assistant Professor, Economics, University of Victoria, Victoria, British Columbia, Canada

My research falls mainly into two areas: labour economics and public economics. Many of my papers deal with policy evaluation, whether in the field of family economics or in the context of interjurisdictional competition. I have mainly focused on the impacts of family taxation on intrafamily distribution, and I have analyzed the impacts of capital taxes, capital incentives, and production taxes on the efficient provision of public services to firms and residents in models of tax competition. I examine these questions by building theoretical models that are quite complex, yet manageable.

Brad Hackinen

Honours Student, Economics, University of Victoria, British Columbia, Canada

Dr. David Scoones

Associate Professor, Economics, University of Victoria, British Columbia, Canada