Scale economies and local self-governments

1. Scaleeconomies and localself-governments Juraj NEMEC, Jana Soukopova and LenkaMATEJOVA, Masaryk UniversityBrno, Czech Republic

2. Decentralisation: economic argument When there is intergovernmental collaboration, then principals placed lower down know better how public programmes can be made to run efficiently” (Lane, 2002, p. 205).

3. Decentralisation: economic explanation • Several arguments why can be found in the economic literature in favor of decentralisation/smallerlocalunits, like: • Better knowledge of local needs • Limitedcapacitiesofsmalllocalgovernmnets • Scale economies, etc.: ourgoal to test theirexistence in ourcurrentresearch

4. Testingeconomiesofscale in Czech and Slovak • Czech Republic – local public services (currentfocusofthe Department) and local taxation (olderdata – Vitek and Pubal) • Slovakia – local taxation, % of administrative costs from total budget (new data, Maly et all) • CZE and SVK research isreally important – highly fragmented territorial structure

5. Table1: Administrative costs of taxation in selected Czech municipalities (2000)

7. Administrativecostsoftaxation: Slovak data • Smallsample 2012: • Administrative costs of local taxation reached 2 - 3% in cities above 30 000 inhabitants, but up to 30% in municipalities with the size 1000-5000 inhabitants.

9. Testingeconomiesofscale in CEE conditions: summaryofresults • Wecanconfirmresultsfromexistingstudies: • alsoin CEE conditions the argument of economies of scale may be irrelevant in cases when it is possible to separate responsibility for service from actual delivery • However, fornon-separablefunctionseconomiesofscalemayexist: jointserviceprovisionmaybesolution (jointmunicipaloffices in Slovakia)

11. Whyeconomicaregumentsfordecentralisationmaynotdeliverexpectedresults in CEE • “Quality” of democracy and local democracy • Localaccountability (MT) • Corruption • Reformcosts

12. Thanksforyourattention!