On the Political Economy of Municipality Break-Ups

Abstract: This thesis deals with politico-economic aspects of municipality break-ups. It consists of an introduction and three self-contained papers. Paper I: The Break-up of Municipalities - Voting Behavior in Local Referenda This paper examines the economic and political conditions that influence people's attitudes regarding a municipality break-up. The theoretical model predicts intra-municipal differences in tax bases, political preferences, and population size to affect the expected gain from secession. The predictions of the model are tested using data on local referenda about municipality partitioning in Sweden. The data support one of the three effects; a tax base effect shows to be present voters in municipality parts that are wealthy compared to other parts of the same municipality are more positive to secession. Paper II: Unequal Provision of Local Public Services under the Threat of Secession This paper studies to what extent it is possible to discriminate between two municipality parts by unequal public service provision when there is a threat of secession. The objective of the local politicians is to maximize utility for only one part of a municipality. The discriminated part is small and politically marginalized, but has the option to secede. The power of the small part's population is in this way entirely exercised through the threat of secession. It becomes their guarantee against being taxed too heavily or against obtaining too little of public services. The case of three recent secession attempts in Göteborg, Sweden, is discussed in light of the model. Paper III: Deciding Who's Decisive: Municipality Break-Ups and the Behavior of Local Politicians Swedish municipality parts aiming for secession are highly dependent on the municipal council's acceptance in order to succeed. Only four of the 25 municipality break-up verdicts passed by the central government have not been in line with the municipal council's recommendation. In nearly all cases, the recommendation seems to be based on the stated opinion in local referenda or opinion polls. However, by deciding on whether the whole municipality, or the seceding part alone should be encompassed by the referendum or opinion poll, the municipal council can affect the probability of obtaining the desired result. This paper empirically studies this decision. Two factors show to be important. If a secession would result in a large reduction of the municipality's population and a decrease in its per capita tax base, the referendum or opinion poll is more likely to encompass the whole municipality. Such a referendum or opinion poll does, in turn, decrease the probability of a municipal council supporting the case, which reduces the central government's propensity to finally approve a secession.