Jurisdictional Consolidation and Local Economic Development

Local governments in peripheral areas are under strain. Many of them risk to find themselves in a vicious cycle of depopulation, decreasing economic activity, and increasing difficulties to deliver attractive public services due to fiscal constraints. To break out of this vicious cycle, local governments increasingly resort to politico-administrative reforms. In particular, many of them join forces and merge with neighboring local governments – the rationale being that they will be in a better position to offer attractive conditions for both residents and businesses as a consolidated jurisdiction. In this article, I assess this rationale by studying the impact of all Swiss municipal merger projects since the new millennium (N=484) on local economic development. Employing staggered difference-in-differences analysis and comparing the evolution of merged, nearly-merged, and non-merged municipalities, I examine whether jurisdictional consolidation has a positive effect on population growth, the number of jobs and the number of companies located in a municipality, as well as on public and private infrastructure investment and housing construction. A particular focus lies on municipal merger projects in peripheral and rural areas – the context in which most Swiss municipal mergers occur. The findings will yield important insights for scholars interested in local economic development as well as for policy-makers considering jurisdictional consolidation as a possible way out of peripheral decline.