Although more rapid development is a primary motivation behind city–county consolidations, few empirical studies explore the impact of consolidation on economic development. No studies look at government consolidation in the United States using modern causal inference methods. We use the synthetic control method to examine the long-term impact of city–county consolidations on per capita income, population, and employment. The results from the three cases explored indicate that consolidation does not guarantee development and actually can have negative effects. Additionally, consolidation can deepen the urban-rural divide by accelerating the decline of rural populations relative to those of urban areas. The effects vary based upon the county, time horizon and development measure. The results are robust to placebo test simulations and counterfactuals constructed only from counties with earlier failed consolidation attempts. Our results highlight how public choice considerations surrounding the implementation of governmental consolidations are crucial to outcomes and can help inform any subsequent city–county consolidation attempts.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Price includes VAT for USA
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
This is the net price. Taxes to be calculated in checkout.
Martin and Schiff (2011) list 39 successful city–county consolidations as of 2011. According to our analysis of the National Association of Counties’ information on “government structure,” that number is now 41. In terms of attempts at consolidation, a search of “city–county consolidation” in Newsbank yields over 11,000 results.
For a thorough treatment of the theoretical reasons for and against local government consolidations as well as an analysis of the case-study evidence, see Hall et al. (2018).
For readers unfamiliar with the use of nighttime luminosity to measure economic activity, the seminal paper is by Henderson et al. (2012). Digital satellite data exist from 1992 onwards and thus our three case studies are not suitable for the approach used by Egger et al. (2018). However, in the results section, we consider how consolidation affects the urban-rural divide by taking account of the rural-total population ratio.
SCM is a generalization of the difference-in-differences model (Abadie and Gardeazabal 2003; Abadie et al. 2010). While previous studies examine growth in consolidated counties to state-wide trends or comparison counties defined in ad hoc ways, the SCM systematically identifies a comparison case by weighting all counties in a state based upon a set of key predictor variables of development.
We are indebted to a referee for highlighting that point for us. When using the SCM, the donor pool is a group of similar regions from which the synthetic counterfactual is created but which did not receive the intervention.
Martin and McKenzie (1975) present a theoretical model wherein the benefits from consolidation will be captured by the bureaucracy of the newly consolidated government.
While we see our exercise as primarily empirical in this paper, we would highlight the deep and rich public choice tradition of Vincent and Elinor Ostrom with respect to the public choice issues surrounding consolidation and jurisdictional fragmentation (Ostrom et al. 1961; Ostrom 2010; Lowery 2013; Aligica 2015).
Our discussion here is only about the literature on the economic development or growth impacts of city–county consolidation. A large related literature exists that looks at the effect of government consolidation on governmental costs (Allers and Geertsema 2016; Blesse and Baskaran 2016; Fahey et al. 2016; Swianiewicz and Łukomska 2019), expenditures (Roesel 2017), and political power (Harjunen et al. 2019).
For additional details on the referendum, see Bacot (2004).
“Cooperative Endeavor Agreement Between the Lafayette City-Parish Consolidated Government and the Lafayette Parish School Board Concerning the Sharing of Costs Associated with the Alteration of District Boundaries”, see http://webcache.googleusercontent.com/search?q=cache:63QSyRKnS3UJ:esbstaff.lpssonline.com/attachments/de0d01b0-43d1-4833-b56d-7219cc39b6da.doc+&cd=4&hl=en&ct=clnk&gl=us, accessed on May 20, 2019.
US Census Bureau, https://www.census.gov/, accessed on May 20, 2019.
US Census Bureau, https://www.census.gov/, accessed on May 20, 2019.
Another trade-off with donor pool selection is between having an appropriate comparison group and potential spillover effects (Gobillon and Magnac 2016). Areas adjacent to the treated region are natural controls, but could experience spillover effects from the treated region. For example, if consolidation leads to better economic development prospects, businesses and residents in surrounding counties could move to the newly consolidated jurisdiction. That effect would violate the SCM’s assumption that the shock affects the treated region only. Thus, following Pfeifer et al. (2018), who drop from the donor pool municipalities directly adjacent to their treated regions, in addition to our main results, we also conduct an analysis with counties adjacent to the consolidated counties excluded from the donor pool. The results are comparable.
Although the consolidated government was not fully functional until 1996, the year of the referendum (1992) is used as the treatment year because between 1992 and 1996, a transition to the consolidated government was underway.
Placebo tests using absolute difference are similar and available for all consolidation cases in Appendix 1.
For a detailed discussion of the politics and implementation of consolidation, see Bacot (2004).
We are indebted to a referee for highlighting this point for us.
The US Census defines rural areas as places with fewer than 2500 inhabitants.
In previous figures, the vertical line represented both the treatment year and the year of the consolidation referendum. However, with the rural to total population ratio available only every 10 years, the vertical line now represents the year of the consolidation referendum. The first treatment year for each case is 2000.
Abadie, A., & Gardeazabal, J. (2003). The economic costs of conflict: A case study of the Basque Country. American Economic Review, 93(1), 113–132.
Abadie, A., Diamond, A., & Hainmueller, J. (2010). Synthetic control methods for comparative case studies: Estimating the effect of California’s tobacco control program. Journal of the American Statistical Association, 105(490), 493–505.
Abadie, A., Diamond, A., & Hainmueller, J. (2015). Comparative politics and the synthetic control method. American Journal of Political Science, 59(2), 495–510.
Adhikari, B., & Alm, J. (2016). Evaluating the economic effects of flat tax reforms using synthetic control methods. Southern Economic Journal, 83(2), 437–463.
Aligica, P. D. (2015). Public administration, public choice and the Ostroms: The achievements, the failure, the promise. Public Choice, 163(1–2), 111–127.
Allers, M. A., & Geertsema, J. B. (2016). The effects of local government amalgamation on public spending, taxation, and service levels: Evidence from 15 years of municipal consolidation. Journal of Regional Science, 56(4), 659–682.
Associated Press. (2014). Durel rails against consolidated government. Associated Press State & Local, August:Online.
Bacot, H. (2004). City-parish consolidated government: Lafayette Parish and the city of Lafayette, Louisiana. In S. M. Leland & K. M. Thurmaier (Eds.), Case studies of city–county consolidation: Reshaping the local government landscape (pp. 129–154). New York: M.E. Sharpe.
Blesse, S., & Baskaran, T. (2016). Do municipal mergers reduce costs? Evidence from a German federal state. Regional Science and Urban Economics, 59(1), 54–74.
Brand, A. L., & Villavaso, S. D. (2011). Revising Palermo: The twentieth anniversary of Louisiana’s landmark land use rights and zoning decision and its legacy for planning in Louisiana. Loyola Law Review, 57, 113–133.
Campbell, R. W., Gillespie, W. L., & Durning, D. (2004). Financial crisis, racial accommodation, and the consolidation of Augusta and Richmond, Georgia. In S. M. Leland & K. M. Thurmaier (Eds.), Case studies of city–county consolidation: Reshaping the local government landscape (pp. 193–122). New York: M.E. Sharpe.
Carr, J. B., & Feiock, R. C. (1999). Metropolitan government and economic development. Urban Affairs Review, 34(3), 476–488.
Carr, J. B., Bae, S.-S., & Lu, W. (2006). City-county government and promises of economic development: A tale of two cities. State and Local Government Review, 38(3), 131–141.
Chaurey, R. (2017). Location-based tax incentives: Evidence from India. Journal of Public Economics, 156(1), 101–120.
Condrey, S. E. (1994). Organizational and personnel impacts on local government consolidation: Athens-Clarke County, Georgia. Journal of Urban Affairs, 16(4), 371–383.
Davis, J. (1999). Augusta anxious over findings; Special grand jury’s probe has the city on edge. The Atlanta Journal and Constitution, December: Online.
Duranton, G., & Puga, D. (2014). Chapter 5: The growth of cities. In P. Aghion & S. N. Durlauf (Eds.), Handbook of economic growth (Vol. 2, pp. 781–853). Amsterdam: Elselvier.
Durning, D. (1995). The effects of city–county government consolidation: The perspectives of united government employees in Athens-Clarke County, Georgia. Public Administration Quarterly, 19(3), 272–298.
Durning, D., Gillespie, W., & Campbell, R. (2004). The better way: The unification of Athens and Clarke, Georgia. In S. M. Leland & K. M. Thurmaier (Eds.), Case studies of city-county consolidation: Reshaping the local government landscape (pp. 103–128). New York: M.E. Sharpe.
Egger, P. H., Koethenbuerger, M., & Loumeau, G. (2018). Municipal Megers and economic activity. In Paper presented at the 111th Annual Conference of the National Tax Association.
Eidson, S. (2014). For better or worse—10 years after consolidation. Metro Spirit, August:Online.
Fahey, G., Drew, J., & Dollery, B. (2016). Merger myths: A functional analysis of scale economies New South Wales local government. Public Finance & Management, 16(4), 362–382.
Faulk, D., & Schansberg, E. (2009). An examination of selected economic development outcomes from consolidation. State and Local Government Review, 41(3), 193–200.
Feiock, R. C., & Carr, J. B. (1997). A reassessment of city/county consolidation: Economic development impacts. State and Local Government Review, 29(3), 166–171.
Feiock, R. C., & Carr, J. B. (2000). Private incentives and academic entrepreneurship: The promotion of city-county consolidation. Public Administration Quarterly, 24(2), 223–245.
Feiock, R. C., Dubnick, M., & Mitchell, J. (1993). State economic development policies and national economic growth. Public Administration Quarterly, 17(1), 55–67.
Fleischmann, A. (2000). Regionalism and city–county consolidation in small metro areas. State and Local Government Review, 32(3), 213–226.
Fleischmann, A., & Green, G. P. (1991). Organizing local agencies to promote economic development. American Review of Public Administration, 21(1), 1–15.
Glaeser, E. L., & Saiz, A. (2004). The rise of the skilled city. Brookings–Wharton Papers on Urban Affairs, 2004(1), 47–105.
Gobillon, L., & Magnac, T. (2016). Regional policy evaluation: Interactive fixed effects and synthetic controls. Review of Economics and Statistics, 98(3), 535–551.
Goodman, C. B., & Leland, S. M. (2013). Cost shocks and their relationship to the creation, consolidation and dissolution of US local governments. Public Finance and Management, 13(2), 58–79.
Grier, K., & Maynard, N. (2016). The economic consequences of Hugo Chavez: A synthetic control analysis. Journal of Economic Behavior & Organization, 125, 1–21.
Hall, J., Matti, J., & Zhou, Y. (2018). Regionalization and consolidation of municipal taxes and services. Review of Regional Studies, 48(2), 245–262.
Harjunen, O., Saarimaa, T., & Tukiainen, J. (2019). Political representation and effects of municipal mergers. Political Science Research and Methods, Forthcoming.
Henderson, J. V., Storeygard, A., & Weil, D. N. (2012). Measuring economic growth from outer space. American Economic Review, 102(2), 994–1028.
Higgins, M. J., Levy, D., & Young, A. T. (2006). Growth and convergence across the United States: Evidence from county-level data. Review of Economics and Statistics, 88(4), 671–681.
Kim, J. H., & Jurey, N. (2013). Local and regional governance structures: Fiscal, economic, equity, and environmental outcomes. Journal of Planning Literature, 28(2), 111–123.
Leichenko, R. M. (2001). Growth and change in US cities and suburbs. Growth and Change, 32(3), 326–354.
Leland, S. M., & Thurmaier, K. (2004). Introduction. In S. M. Leland & K. M. Thurmaier (Eds.), Case studies of city–county consolidation: Reshaping the local government landscape (pp. 3–27).
Leland, S. M., & Thurmaier, K. (2005). When efficiency is unbelievable: Normative lessons from 30 years of city-county consolidations. Public Administration Review, 65(4), 475–489.
Leland, S. M., & Thurmaier, K. (2010). City-county consolidation: Promises made, promises kept?. Washington, DC: Georgetown University Press.
Lowery, D. (2013). Remembering Vincent Ostrom: Unhorsing a dominant paradigm. Public Choice, 154(3–4), 163–171.
Manson, S., Schroeder, J., Van Riper, D., & Ruggles, S. (2018). IPUMS national historical geographic information system: Version 13.0 [database].
Marcus, J., & Siedler, T. (2015). Reducing binge drinking? The effect of a ban on late-night off-premise alcohol sales on alcohol-related hospital stays in Germany. Journal of Public Economics, 123(1), 55–77.
Martin, D. T., & McKenzie, R. B. (1975). Bureaucratic profits, migration costs, and the consolidation of local government. Public Choice, 23(1), 95–100.
Martin, L. L., & Schiff, J. H. (2011). City-county consolidations: Promise versus performance. State and Local Government Review, 43(2), 167–177.
McGranahan, D. A. (1999). Natural amenities drive rural population change. Technical Report 781, US Department of Agriculture, Washington DC.
Metro Spirit (2018). Does the mayor matter? Metro Spirit, January:Online.
Mitchell, M. D., & Boettke, P. J. (2017). Applied mainline economics: Bridging the gap between theory and public policy. Fairfax, VA: Mercatus Center George Mason University.
Munasib, A., & Rickman, D. S. (2015). Regional economic impacts of the shale gas and tight oil boom: A synthetic control analysis. Regional Science and Urban Economics, 50, 1–17.
Murphy, K. (2012). Reshaping county government: A look at city–county consolidation. Washington, DC: National Association of Counties.
Ostrom, E. (2010). Organizational economics: Applications to metropolitan governance. Journal of Institutional Economics, 6(1), 109–115.
Ostrom, V. (1969). Operational federalism: Organization for the provision of public services in the American federal system. Public Choice, 6(1), 1–17.
Ostrom, V., Tiebout, C. M., & Warren, R. (1961). The organization of government in metropolitan areas: A theoretical inquiry. American Political Science Review, 55(4), 831–842.
Ottaviano, G. I., & Peri, G. (2006). The economic value of cultural diversity: Evidence from US cities. Journal of Economic Geography, 6(1), 9–44.
Partridge, M. D., Rickman, D. S., Ali, K., & Olfert, M. R. (2008). Lost in space: Population growth in the American hinterlands and small cities. Journal of Economic Geography, 8(6), 727–757.
Partridge, M. D., Rickman, D. S., Ali, K., & Olfert, M. R. (2009). Agglomeration spillovers and wage and housing cost gradients across the urban hierarchy. Journal of International Economics, 78(1), 126–140.
Pfeifer, G., Wahl, F., & Marczak, M. (2018). Illuminating the World Cup effect: Night lights evidence from South Africa. Journal of Regional Science, 58(5), 887–920.
Powell, B., Clark, J., & Nowrasteh, A. (2017). Does mass immigration destroy institutions? 1990s Israel as a natural experiment. Journal of Economic Behavior & Organization, 141, 83–95.
Premus, R. (1977). A competitive model of local government organization: Implications for the process of community formation within metropolitan regions. Public Choice, 29(1), 109–125.
Roesel, F. (2017). Do mergers of large local governments reduce expenditures? Evidence from Germany using the synthetic control method. European Journal of Political Economy, 50(1), 22–36.
Rosenbaum, W. A., & Kammerer, G. M. (1974). Against long odds: The theory and practice of successful governmental consolidation. Thousand Oaks, CA: Sage Publications.
Ross, J. M. (2018). Unfunded mandates and fiscal structure: Empirical evidence from a synthetic control model. Public Administration Review, 78(1), 92–103.
Schultz, B. (1996). The new face of Lafayette government. The Advocate, June:Online.
Selden, S. C., & Campbell, R. W. (2000). The expenditure impacts of unification in a small Georgia county: A contingency perspective of city–county consolidation. Public Administration Quarterly, 24(2), 169–201.
Solé-Ollé, A. (2006). Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain. Journal of Urban Economics, 59(1), 32–53.
Stansel, D. (2012). Competition, knowledge, and local government. Review of Austrian Economics, 25(3), 243–253.
Sugiyama, S. (2017). Here’s what the planned Syracuse-Onondaga County government merger looks like. Daily Orange, February:Online.
Swianiewicz, P., & Łukomska, J. (2019). Is small beautiful? The quasi-experimental analysis of the impact of territorial fragmentation on costs in Polish local governments. Urban Affairs Review, 55(3), 832–855.
Taylor, C. D., Faulk, D., & Schaal, P. (2017). Where are the cost savings in city–county consolidation? Journal of Urban Affairs, 39(2), 185–204.
Tiebout, C. (1956). A pure theory of local expenditure. Journal of Political Economy, 64(5), 416–424.
Tullock, G. (1994). The new federalist. Vancouver: Fraser Institute.
Vihanto, M. (1992). Competition between local governments as a discovery procedure. Journal of Institutional and Theoretical Economics, 148(3), 411–436.
Wagner, R. E., & Weber, W. E. (1975). Competition, monopoly, and the organization of government in metropolitan areas. Journal of Law and Economics, 18(3), 661–684.
Zhou, Y. (2018). Do ideology movements and legal intervention matter: A synthetic control analysis of the Chongqing model. European Journal of Political Economy, 51(1), 44–56.
We thank seminar participants at West Virginia University. The authors would also like to thank Kate Nesse, Brigid Tuck, Douglas Walker, and other participants at the 2018 Mid-Continent Regional Science Association meetings. Russell Sobel, Dwight Lee, John Garen, Randy Holcombe, J.R. Clark, Edward Lopez, and participants at the 2017 Southern Economic Association Conference. Justin Ross and graduate students at Indiana University provided important feedback. The authors received no specific funding for this research from any source. All three authors receive general research support for conference presentations and submission fees from the Center for Free Enterprise at West Virginia University.
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Hall, J.C., Matti, J. & Zhou, Y. The economic impact of city–county consolidations: a synthetic control approach. Public Choice 184, 43–77 (2020). https://doi.org/10.1007/s11127-019-00699-z
- Local governments
- City–county consolidation
- Synthetic control method