Do Municipal Mergers Reduce Costs? Evidence from a German Federal State

58 Pages Posted: 19 May 2016

See all articles by Sebastian Blesse

Sebastian Blesse

Deutsche Bundesbank

Thushyanthan Baskaran

University of Goettingen (Göttingen)

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Date Written: April 1, 2016


We study the fiscal consequences of municipal mergers by making use of a largescale merger reform in the German federal state of Brandenburg. This reform, which was implemented from 2001 to 2003, led to a substantial reduction in the number of municipalities. Individual mergers were heterogeneous across a number of dimensions, which allows us to contribute to the literature by exploring the consequences of different types of mergers within the same institutional setting. Focusing in particular on the distinction between compulsory and (semi-) voluntary mergers, we implement a difference-in-difference design with panel data from 1995-2010 at the level of post-merger municipalities. We find significant reductions in (administrative) expenditures after compulsory mergers. Voluntary mergers, on the other hand, have no effect on expenditures. We also show that the effects of voluntary and compulsory mergers vary according to further (secondary) characteristics of a merger.

Keywords: Municipal mergers, economies of scale, voluntary and compulsory mergers

JEL Classification: H11, H72, H77, R53

Suggested Citation

Blesse, Sebastian and Baskaran, Thushyanthan, Do Municipal Mergers Reduce Costs? Evidence from a German Federal State (April 1, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-041, Available at SSRN: or

Sebastian Blesse (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

Thushyanthan Baskaran

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073

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