Do Municipal Mergers Improve Technical Efficiency? An Empirical Analysis of the 2008 Queensland Municipal Merger Program

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Journal Article
Australian Journal of Public Administration, 2017, DOI: 10.1111/1467-8500.12286
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Municipal mergers remain an important instrument of local government policy in numerous countries, including Australia, despite some concerns surrounding its efficacy. We consider the claim that amalgamations enhance the technical efficiency of the merged entities by examining the 2008 Queensland compulsory consolidation program which reduced the number of local authorities from 157 to 73 councils. To test the claim we conduct locally inter-temporal data envelopment analysis over the period 2003 to 2013 inclusive. Our evidence suggests that (a) in the financial year preceding the mergers there was no statistically significant difference in the typical efficiency scores of amalgamated and non-amalgamated councils and (b) two years following the mergers the typical technical efficiency score of the amalgamated councils was well below the non-amalgamated cohort. We argue this may be attributed to increased spending on staffing expenses, although comparatively larger operational expenditure also served to diminish efficiency.
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