Exit and Voice within Local Government

Abstract

In Chapter 2 a potential tradeoff was identified between technical efficiency gains from economies of scale and allocative welfare losses as the demographic size of local government varies, smaller size resulting in increased welfare but loss of potential economies of scale for at least some services. Welfare losses due to increasing size occur as a result of two factors.

• 1. The individual’s scope for movement to a neighbouring authority providing the desired mix of service levels and local tax costs is diminished the bigger (and, hence, fewer) are local governments.

• 2. The individual’s preferences are more difficult to articulate (and therefore satisfy) the greater the population catered for.

These factors are refered to as exit and voice respectively.