Consolidation of city, county governments has no impact on economic development

Topic: Miller College of Business

July 27, 2009

 While proponents claim that merging city and county governments will cut costs and make operations more efficient, there is no evidence that such consolidations attract business and new jobs, says a new study from Ball State University.

An examination of three city-county mergers in Georgia, Kansas and Louisiana reveals that government mergers have no statistically discernable effect on economic development, said Dagney Faulk, research director for the Center for Business and Economic Research (CBER), a division of the Miller College of Business at Ball State.

"The study suggests that the consolidated city-county government structure is not important for economic development," said Faulk, who co-authored the study with Eric Schansberg, an economics professor at Indiana University Southeast. The study will be published in an upcoming issue of State and Local Government Review.

"People argue that city-county government consolidation is likely to have a positive effect on economic development because less bureaucracy and more efficient government will attract new businesses, encourage the expansion of existing business, and increase local employment," Faulk said. "However, our analysis indicates that consolidation has no effect on private employment or the number of business establishments." 

Faulk and Schansberg's research looks at the effect of city-county consolidation on employment and the number of business establishments in Augusta-Richmond County in Georgia, Kansas City-Wyandotte in Kansas, and Lafayette City-Lafayette Parish in Louisiana. All three government mergers occurred in the mid-1990s.

In the Georgia and Kansas mergers, the study found that post-consolidation employment and the numbers of business establishments were no different from levels before consolidation or in similar nonconsolidated counties in the state. In Louisiana, Lafayette Parish service employment and number of businesses were higher after consolidation, but the difference was not significant, according to the researchers.

City-county consolidation is one mechanism that local governments have sought to use to increase efficiency, decrease costs, address regional issues, and promote economic development. Nine city-county governments have consolidated since 1990, and a total of 38 consolidated city-county governments exist in the U.S. 

Earlier this year, Faulk co-authored a study with Michael Hicks, CBER director, on government consolidation that found Indiana could reduce costs by an expected $622 million annually by combining local governments to improve the efficiency of various fire, police, sewerage and other services as well as reduce operational and administrative costs.

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