Abstract

The issues of municipal amalgamation and sustainability are closely related, but the link is not always clear. There is a substantial body of literature examining whether the consolidations of local governments rectify unsustainable paths. However, much of this empirical research suffers from methodological oversights which may yield misleading conclusions about the effectiveness of these political restructurings. The most egregious errors are a failure to appropriately account for the behaviour of economic variables, and a tendency to select indicators which may not be representative of the true or most relevant effects of the amalgamation (e.g. there is often an overemphasis on factors such as cost-savings). We use a simple example to show that public good spillover effects combined with an inability to raise revenues may put urban centres on unsustainable financial paths. In recognition of this, it is essential to find cooperative structures which enable the provision of an efficient level of public goods, while ensuring the contribution of surrounding regions. Given the political penchant for resorting to amalgamation as a solution, it is important to determine whether or not this is an effective tool for cooperation. This paper advocates taking a more rigorous and contextual empirical approach which focuses on dynamic aspects and answering questions such as: does the amalgamation increase economic activity, make the region a more attractive place to live, enable the region to collect sufficient revenues to meet expenditure requirements, and maintain a vibrant and functional downtown area?