Municipal Amalgamations and Common Pool Problems: The Danish Local Government Reform in 2007

Amalgamating municipalities carries risks in terms of public expenditure control. The tax base of the new amalgamated municipality represents a common pool resource. The incentive is to exploit it – that is, to spend before closing time. This article investigates last-minute spending by Danish municipalities before the local government reform in 2007 in which 271 municipalities were reduced to 98. It shows that local councillors exploited this situation to finance local projects before closing time. The article thus demonstrates the occurrence of common pool problems in amalgamation situations. However, it also shows that it is the availability of a common pool that matters, not its size.     

Merged municipalities, higher debt: on free-riding and the common pool problem in politics

This paper uses the Swedish municipal amalgamation reform of 1952 to study the common pool problem in politics. The amalgams were common pools and the municipalities had incentives to free-ride on their amalgam partners by increasing debt prior to amalgamation. We find that municipalities that merged in 1952 increased their debt between 1948 and 1952 when the reform could be anticipated. The increase amounted to 52% of new debt issued or 1.5% of total revenues in the merged municipalities. But contrary to the “law of 1/n”, free-riding did not increase in common pool size.     

Integration of the Swedish Local Elite: The Role of Professional and Private Networks

This article uses social network data to study the integration of local elites in four Swedish municipalities. Four research questions are asked. First: How integrated are the elites? While the results modify the picture that there are two rather distinct elites in Sweden – that is, a political elite dominated by the labour movement and an economic elite dominated by business and the large business organizations – it is interesting to note that integration between elite spheres is lowest for the relation between politicians and business representatives. To a considerable degree, integration between political and economic elites is indirect, mediated through the administrative elite. The second question is: Are the inner elite circles dominated by the political, economic or administrative elite? The study indicates that local elites in Sweden are strongly dominated by political elites, and also by administrative elites. This is reassuring, since it would indicate a democratic deficit if the structural power of decision making in municipalities resided predominantly in economic actors and administrators. The third question is: What is the role of friendship relations in creating elite integration? The study indicates that private relations among elites both reinforce professional networks and extend them in important ways. The final question is: Is elite integration contingent on political stability and/or the structure of local business? The results are surprisingly stable across the four municipalities, even though the largest distinction was found between elite core and periphery in the politically most stable municipality, which was also the one with the lowest economic diversity.     

Does Direct Democracy Hurt Immigrant Minorities? Evidence from Naturalization Decisions in Switzerland

Do minorities fare worse under direct democracy than under representative democracy? We provide new evidence by studying naturalization requests of immigrants in Switzerland that were typically decided with referendums in each municipality. Using panel data from about 1,400 municipalities for the 1991–2009 period, we exploit Federal Court rulings that forced municipalities to transfer the decisions to their elected municipality councils. We find that naturalization rates surged by about 60% once politicians rather than citizens began deciding on naturalization applications. Whereas voters in referendums face no cost of arbitrarily rejecting qualified applicants based on discriminatory preferences, politicians in the council are constrained to formally justify rejections and may be held accountable by judicial review. Consistent with this mechanism, the increase in naturalization rates caused by switching from direct to representative democracy is much stronger for more marginalized immigrant groups and in areas where voters are more xenophobic or where judicial review is more salient.     

Organizations and Pluralist Democracy

The ideal conception of pluralist democracy can be seen as a schematic picture of actual conditions. On the local level - in the municipalities - there are a number of variants of pluralism. If local political systems can be assumed to be of varying character, it stands to reason that the roles of organizations in those sub-systems can also vary.
The following three general conclusions concerning the role of organizations in Swedish municipal politics are supported by our empirical findings:
(1) A heterogeneous pattern of values in a municipality promotes the development of an arrangement in which organizations predominantly assume the role of political opposition.
(2) The interaction between municipalities and organizations is a function of the pattern of local political values. The more heterogeneous this pattern, the more frequent are politically oriented contacts.
(3) Increased overlap of the social, the economic and the political arenas, and a more incrementalist decision-making structure in modern municipalities, creates greater incentives for the formation of organizations.
There should not be any doubt about the fact that the amalgamation reforms contributed to the creation of a more differentiated and multifaced structure of organizations. Hence, it could be said that the amalgamation reforms together with other structural factors are in the long run positively correlated with pluralism!
'Whatever progress may come in the future, anyone attempting today to give a systematic account of organizational behavior, especially of politically relevant behavior, cannot pretend he is offering a theory in any strict sense. At best, he can offer a theoretical perspective, a way of looking at organizations that directs attention persuasively to a few central processes that seem to explain (though not predict, in any scientific sense) a wide variety of phenomena.' (Wilson 1973. 13).     

A Review of: “Organizational Knowledge. The Texture of Workplace Learning by Silvia Gherardi with the Collaboration of Davide Nicolini”

ABSTRACT

This article provides new empirical evidence about Flemish municipal councilors’ use of financial information in the yearly budget debate. Since councilors generally do not handle information according to “standard use models,” we adopt an innovative method of data collection by scrutinizing their speech for the presence of financial information during the budget debate in Flemish municipalities. The incorporation of financial information in councilors’ contributions to the debate is conceptualized as a particular form of observable use of financial information. We quantitatively assess the presence of both budgetary and accrual financial information using a scoring technique taken from the management accounting literature. Additionally, we analyze whether various political and financial circumstances affect politicians’ mentioning of this information in their deliberations. Our results reveal a strong prevalence of budgetary information in councilors’ speech. This is influenced by both political conditions and the financial position of the municipality.     

Evaluating California’s Housing Element Law,Housing Equity,and Housing Production (1990–2007)

Since 1969, California’s Housing Element Law has required that municipalities address housing equity and housing production. In California, housing equity means that a municipality has planned for the future production of low-income housing that is priced from 0 to 120% of the U.S. Department of Housing and Urban Development’s median family income, and market-rate housing that is priced higher than 121%. For a purposive sample of municipalities (Sacramento and Los Angeles regions, 1990 to 2007, n = 53), this research found that as compliance with the law increased, the sample experienced deficient low-income housing production but surplus market-rate housing production. Mixed-effects models indicated that compliant municipalities were associated not only with increased low-income housing production but also with decreased annual housing production in comparison to noncompliant municipalities. While these associations contrast with Lewis, they suggest that municipal compliance may support California’s goal of providing housing equity but may also constrain California’s overall housing production.     

Consensual Coalitions? Coalition Formation in Norwegian Municipalities

While widely applied to political coalitions in national assemblies and cabinets, theories of coalition formation have seldom been tested at the local level of government. This article presents a model of coalition formation in connection with mayoral elections in Norwegian local councils and tests it on the basis of the first systematic collection of data on the election of mayors from a large number of municipalities. It finds small significant effects on the probability that oversized coalitions will be formed. Contrary to "common" knowledge, the size of a municipality has a positive influence on the conflictual climate, and thus on the size of the coalitions formed, which implies that the probability that an oversized coalition will form is higher in a large than in a small municipality. It also finds that the possibility that an oversized coalition will form increases if one party controls a majority of the councilors on its own, and if the majority is non-socialistically controlled. The assumption of a strong norm for reaching consensus-based decisions, reinforced by the design of the local political institutions, is supported.     

Who ‘marries’ whom? The influence of societal connectedness,economic and political homogeneity,and population size on jurisdictional consolidations

For decades, political scientists have been asking how political jurisdictions are formed and reshaped. Nevertheless, studies of local government jurisdictional formation are few and often plagued with endogeneity since the formation of jurisdictions cannot be separated from sorting effects. In this article, the unique case of the Danish structural reform is utilised to overcome endogeneity due to migration‐related sorting by studying patterns of municipal amalgamations. In the recent Danish reform, 239 of 271 municipal entities were forced to amalgamate simultaneously, while who actually amalgamated with whom was left entirely to negotiations between the respective municipalities. Applying logistical regression to a dataset where the unit of analysis is dyads of municipalities allows the construction of a relational model for estimating the effect of different political and societal variables on the likelihood of amalgamation. Societal connectedness, population size and geography are important predictors of amalgamation patterns, while political and economic homogeneity between municipalities does not appear to matter much.     

A Kinder,Gentler Democracy? The Consensus Model and Swedish Disability Politics

Arend Lijphart's seminal consensus model of democracy does not only try to explain how democracy actually works. It also purports to be a ‘kinder, gentler’ form of democracy with regard to e.g. unemployment, disability, illness and old age. So far, this conjecture has not been brought to a systematic test which is the purpose of this article. We look into the consequences for one of the areas Lijphart singles out: disability. Does consensus democracy promote a more generous policy towards disabled people than majoritarian democracy? We transfer Lijphart's theory to municipality level. In Sweden, disability care is namely the responsibility for the municipalities, which are comparatively large and independent and with the right to tax their citizens; they are like small nation‐states. There is, however, a considerable variation in disability support between them. Some give ten times as much support than others. Is it those governed according to the consensus model? Our approach helps controlling for the variation in political and cultural context and expands the number of observations. The statistical comparison of Swedish municipalities does not, however, lend any confirmation of the famous theory. Instead, there are reasons to doubt that consensus democracy promotes more generous policies.     

The Coexistence of Different Welfare Regimes in the Same Country: A Comparative Analysis of the Brazilian Municipalities Heterogeneity

Abstract

This paper demonstrates that heterogeneous countries such as Brazil have vast differences in welfare arrangements at the sub-national level. A number of social policies (social insurance, education, health and social assistance) were analysed in 5,565 Brazilian municipalities along five dimensions: expenditure, coverage, share of private spending, family structure and poverty. The grade of membership method was used to cluster municipalities and identify the main differences in their welfare regimes. Factor analysis was also used to explore which dimensions are most relevant in characterizing these sub-national regimes. The results show highly heterogeneous institutional forms of social protection across municipalities, which are classified as social assistance, quasi-social assistance, corporative, quasi-corporative, family insurance and intermediary welfare regimes.     

Europe's migration crisis: Local contact and out-group hostility

Does a large influx of asylum seekers in the local community lead to a backlash in public opinion towards foreign populations? We assess the effects of asylum seeker presence using original survey and macro-level municipality data from Austria, exploiting exogenous elements of the placement of asylum seekers on the municipality level. Methodologically, we draw on entropy balancing for causal identification. Our findings are threefold. First, respondents in municipalities receiving asylum seekers report substantially higher exposure on average, but largely without the stronger contact that would allow for meaningful interaction. Second, hostility towards asylum seekers on average increased in areas that housed them. Third, this backlash spilt over: general attitudes towards Muslims and immigrants are less favourable in contexts with local asylum seeker presence, while vote intention for the main anti-immigration party is higher. Our findings go beyond existing work by examining contact directly as a mechanism, by showing a backlash effect in the medium term, and by focusing on a broad set of attitudinal and behavioural measures. Our results point to a need to design policy interventions that minimise citizen backlash against rapid migration inflows.     

Decentralization,Fiscal Independence,and Poverty in the Philippines

Decentralization is a common public sector reform in developing countries. Its basic rationale is that local governments have an informational advantage regarding the needs and preferences of consumers. However, decentralization also has drawbacks. Foremost is the efficiency advantage of the central government in providing public services because of economies of scale and better access to resources. This study looked at the relationship between decentralization and poverty using data from Philippine cities and municipalities. Results suggest that decentralization, as represented by fiscal independence and measured by the share of locally sourced revenues to total local government revenues, is indeed associated with lower poverty. However, this effect is not linear—the marginal effect of decentralization on poverty diminishes as decentralization increases. Moreover, decentralization moderates the positive effect of good governance on poverty reduction and the magnitude of the relationship between poverty and decentralization is stronger in poorer municipalities than in richer ones.     

Explaining Interest Rates in Local Government Borrowing

ABSTRACT

This article analyzes the usefulness of municipal accounting information in the interest rates agreed on by financial institutions in the European context. Most of the literature has focused on municipal bonds, mainly in the United States. Our core contribution is to study which factors determine the interest rates on bank loans to municipalities. This framework is different, since there is neither a secondary bond market nor credit ratings, and therefore information asymmetry is higher. Specifically, we investigate if municipal financial indicators and financial reports’ quality have an influence on interest rates paid by Spanish municipalities in the period 2001–2008. Our empirical results indicate that, in general, the municipal financial situation exerts an influence on the credit policy of lenders, who charge a risk premium to those municipalities with less current surplus, which is an indicator of the municipality's saving ability. Furthermore, there is also some inertia in the municipal annual interest rate (year t ? 1 interest determines around 27% of year t interest). Other findings indicate that high levels of expenditures and debt per capita increase the interest cost of municipal borrowing. Finally, municipalities that disclose full detailed financial reports pay less interest because information asymmetry and transaction costs are lower.     

Provincial intervention outcomes in Makana Local Municipality in the Eastern Cape Province

The main aim of this article is to assess Provincial intervention outcomes in Makana Local Municipality, identify factors, which cause unsuccessful Provincial intervention, and lastly, measure the extent to which these factors played a role during intervention in Makana Local Municipality. Provincial interventions have been granted a legal and constitutional status by South African Constitution, Section 100 – 139 and 216. Therefore, Provincial interventions have been used to assist municipalities that are failing to achieve their constitutional mandate as a result of multiple issues, such as, financial instability, corruption, maladministration, poor leadership and management, and political tensions. Interventions by the Province are therefore meant to find long-term solutions to the problems municipalities find themselves in. It is against this background that this article assess the outcomes of the Provincial intervention in Makana Local Municipality. The research utilized a qualitative approach in a form of documentary sources and open-ended interviews with a range of actors in Makana Local Municipality. The study found that Provincial intervention in Makana has resulted to some extent successful outcomes; however, there are still areas needing further improvements in the municipality as evident by the current state of the municipality. The key findings of the study include an increase of 8 million in Revenue Collection, the development of a clear, firm Creditor Payment Procedure, and the recruitment process to start filling up critical positions; further to this, Makana received a qualified audit opinion in 2015; in addition, the municipality is honoring the Creditors' debt repayment plans in accordance. This is the presentation of findings on the outcomes of Provincial intervention in Makana Municipality. The article concludes by providing lessons for both the Province and Local government for effective interventions.     

Local Government and Welfare Generosity: Municipality Spending on Social Welfare

Although it is difficult for local governments to give support for social welfare recipients top political priority, there are huge variations in the support recipients actually receive among Norwegian municipalities. However, local governments representing different party ideologies may prefer to support different dimensions of generosity. Some municipalities could have a liberal attitude to eligibility rules but be strict on time limits and the amount of money provided. Others may be generous regarding time limits or amounts received once one is accepted as a welfare client. Data from the mid 1990s indicate the variation in support is related to different generosity dimensions for different party groups. While the total number of clients seems unrelated to politics and basically correlates with local social problems, the duration and amount of support are related to the political composition of the municipality assembly. Devoid of any large variation, both time limits and the amount of support increase in accordance with socialist leanings, and the total budget used for social welfare support also increases with the proportion of women in the municipality assembly.     

Homeownership and neighborhood stability

Abstract

A major objective of many neighborhood revitalization programs is to increase homeownership. Conventional wisdom holds that this is one of the best ways to stabilize areas in decline. This article questions convention by presenting a conceptual model of how homeownership rates might affect various indicators of neighborhood stability and by determining whether there is support for this model in the literature. The article also presents an original analysis of the relationship between homeownership rates and two measures of neighborhood stability.

The literature review finds considerable support for an association between homeownership and both improved property maintenance and longer lengths of tenure. The analysis of census data similarly indicates less residential mobility and greater property value appreciation in areas with greater home‐ownership. Although initial values and citywide value changes appear to have much stronger effects on changes in property values than the tract home‐ownership rate, modest changes in homeownership rates are clearly associated with increased property values.     

Pay to protect: Examining the factors of the use of market-based instruments for local water sustainability

Given the myriad of policy instruments aimed at enhancing water quantity conservation available to municipalities, what drives them to opt for a market-based instrument (MBI)? MBIs can be effective and efficient policy instruments to enhance water quantity conservation, but there is little known about why municipalities utilize them. This study hypothesizes that three contextual elements influence a municipality's use of an MBI: the natural, political, and structural environment. The results from two logistic regression models suggest that in a municipality suffering a higher drought level, both a conservative political environment and operating under a council-manager form of government (with the effect more pronounced under a non-council-manager form) will increase the likelihood that it will use an MBI to address water conservation.     

Big Guys Eat Big Cakes: Firm Size and Contracting in Urban and Rural Areas

ABSTRACT

A great deal of attention has been devoted to the analysis of different levels of privatization in urban and rural areas. However, until now no empirical study has been conducted on what types of firms are present in different geographical environments. We find that large firms that operate on a national basis dominate the contracts in the most populated and urban municipalities, and these firms seem to have closer relationships with nation-wide political parties. On the contrary, small firms that operate at a local level usually have the contracts in the less populated and isolated municipalities. This market structure may be harmful for competition in both types of municipalities, damaging the likelihood of obtaining cost savings from privatization.     

Revenue Diversification: Fiscal Illusion or Flexible Financial Management

This study examines the trends in revenue diversification in approximately 240 suburban municipalities in the Chicago metropolitan region between 1988 and 1997. It then tests a model of revenue diversification's impact on tax effort using data from 1993 to 1997, and separated by home rule and non–home rule municipalities. Trends show that suburbs with higher increases in diversification tend to be home rule, younger, less residential, experiencing more growth, less reliant on property taxes, and more reliant on sales taxes. Model estimates show that communities with more revenue diversification have lower tax effort when controlling for other determinants of tax effort, and this effect is stronger in non–home rule municipalities.