The Common Pool Problem in Municipal Amalgamation
Abstract: This paper tries to shed some light on the politico economic mechanisms leading to a weakening of the fiscal situation of municipalities after amalgamations. Using a large panel of German municipalities who carried out a huge wave of amalgamations in the first half of the 1970s it tests whether the common pool problem affects the fiscal stance of the municipalities. After testing for the existence of a common pool we additionally test, if the overuse of this common pool depends on the number of municipalities participating and their size relative the municipality they are incorporated to. Several robustness tests, e.g. if the results hold for different size classes of municipalities, are performed.
