Common pool problems in voluntary municipal mergers
Saarimaa, Tuukka; Tukiainen, Janne (2015)
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Saarimaa, Tuukka
Tukiainen, Janne
Elsevier
2015
Kuvaus
peerReviewed
Tiivistelmä
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.
JEL
D72, H72, H74
Avainsanat
Common pool, Difference-in-differences, Law of 1/n, Municipality mergers