2006–2010

Merged Municipalities, Higher debt: On Free-Riding and the Common Pool Problem in Politics

Reprint No. 2010:11

Author(s): Henrik Jordahl and Che-Yuan LiangYear: 2010 Title: Public Choice Volume (No.): 143 (1-2) Pages: 157–172
Online article (restrictions may apply)


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.


Reference:
Jordahl, Henrik and Che-Yuan Liang (2010), "Merged Municipalities, Higher debt: On Free-Riding and the Common Pool Problem in Politics". Public Choice 143(1-2), 157–172.

Henrik Jordahl

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