What are the fiscal effects of municipal mergers? Switzerland is a highly decentralised country, and municipal governments have a significant degree of autonomy at the local level over fiscal policy and expenditure. What is the fiscal effect of mergers between municipalities? What happens to tax rates and expenditures? These questions are at the heart of Professor Marko Köthenbürger’s research. A high degree of political authority is devolved to the local level in Switzerland, where municipal governments have extensive powers over fiscal policy and expenditure. While many people feel a strong sense of identity with the municipality in which they live and relish its autonomy, there are also arguments in favour of merging municipalities. “Through merging or cooperating, municipalities may be able to realise economies of scale and procure goods more efficiently,” points out Marko Köthenbürger, a Professor in the Department of Management, Technology and Economics at ETH Zurich. As the head of a research project based at ETH Zurich, Professor Köthenbürger is investigating the fiscal effects of mergers on municipalities,
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in which their size is an important consideration. “A smaller municipality in Switzerland may have between 500-1,000 inhabitants while at the other end of the scale there are quite large municipalities, like the city of Zurich. Further towards the Alps, municipalities are generally quite small,” he says.
Local services A smaller municipality may have difficulty in recruiting qualified personnel to run local services, while they also have to meet certain standards in the provision of services, and it is these smaller, less well-connected municipalities that tend to seek to merge. The aim may be to help them work more efficiently, but a proposed
merger first requires the consent of the populations affected. “A merger process in Switzerland is subject to a referendum by all the participating municipalities,” explains Professor Köthenbürger. While many proposed mergers have been rejected in Switzerland over recent years, others have been approved, now Professor Köthenbürger and his colleague in the project, Christian Stettler, are analysing the data on tax rates and expenditures in these latter cases. “We’re investigating how these mergers affected the fiscal outcomes in terms of tax rates and expenditures,” he outlines. “We have data on the socio-economic characteristics of these municipalities, as well as on things like their size, population, age structure and taxable income.”
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