The Avoidable Costs of Local Governments’ Fragmentation. An Empirical analysis of Italian Municipalities

The paper explores the relationship between institutions and economic performance referring to a developed country as Italy and at the local scale.

The hypothesis to be tested is whether the institutional hyper fragmentation, with respect to the territorial boundaries of the real communities approximated by daily commuting areas, increases avoidable operating costs. The paper assumes administrative expenses and those for government bodies as measure of the local governments’ operating costs, analyzes its components and determinants, estimating two municipal expenditure functions, and finally assesses the savings achievable introducing a territorial amalgamation of local governments coherent with socioeconomic phenomena