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Paper No' SERCDP0102: | Full paper
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Keywords: Coalition formation; local politics, choice based sampling
JEL Classification: H77; H72; C35
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Abstract:We analyze empirically the coalition formation of local governments using a novel reduced form econometric procedure that allows for multi-partner mergers. Using Finnish municipal merger data where mergers were decided independently at the local level, we find that merger decisions are largely in line with voter preferences. Most importantly, mergers are clearly less likely when the distance of the median voter to the coalition centre is large. However, councillors seem also to prefer mergers where post-merger political competition is lower which indicates a concern for re-election. Interestingly, municipalities do not seem to be seeking economies of scale through merging. This is possibly due to existing cooperation in service production which we find to be a strong predictor of merging.
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