When politics does matter: Explaining the reactions of Swiss municipalities to the “amalgamation wave”. Stefano Calciolari, PhD Assistant Professor in Health Care Management Faculty of Economics, Università della Svizzera italiana Via G. Buffi 13, CH 6904, Lugano, Switzerland e-mail: [email protected] Daniela Cristofoli, PhD Assistant Professor in Public Management Faculty of Economics, Università della Svizzera italiana Via G. Buffi 13, CH 6904, Lugano, Switzerland e-mail: [email protected] Laura Maccio PhD students in Public Management Faculty of Economics, Università della Svizzera italiana Via G. Buffi 13, CH 6904, Lugano, Switzerland e-mail: [email protected] “When politics does matters: Explaining the reactions of Swiss municipalities at amalgamation wave. Introduction Switzerland is a federalist country in the core of Europe. It is made up of 26 Cantons and approximately 2,500 municipalities. About 55% of the municipalities have less than 1,000 inhabitants and only eight municipalities have more than 500,000 inhabitants (Swiss Federal Statistical Office, 2010). Swiss municipalities are very different from the social, cultural and political standpoints (Steiner 2000). However, each one is responsible for providing a wide range of public services, for instance: education during the compulsory time of schooling, social services, utilities and waste disposal, local police, granting of civil rights and internal organization of the civil authorities, etc. During the 90s, the growing citizen demand for high quality services and the strict budget constraints of many municipalities (Ladner and Steiner 1998) raised a political debate on how to ensure effective and efficient fulfilment of municipal tasks. In this debate, amalgamation emerged as a “panacea” to handle the financial distress faced by many Swiss municipalities and often considered due to their small size (Dafflon 2001; Ladner 2001; Soguel 2001). As a consequence, 21 Cantons issued reform laws (Ladner et al. 2000) to promote inter-municipal collaboration and amalgamation. The phenomenon gradually gained momentum, and 263 amalgamations occurred in the period 1960-2009 (Swiss Federal Statistical Office, 2010). As a consequence, the number of 2 Swiss municipalities decreased by about 15% (from 3,095 to 2,636) in almost fifty years, after about a century of stability. Canton Ticino’s amalgamation policy was one of the most proactive in the Confederation in the last decade. At the end of the 90s, a cantonal law was issued encouraging municipal amalgamations. However, despite the economic and the institutional pressures towards amalgamation, 15% municipalities refused amalgamation and the 47% showed indifference. Both the strength and direction of the environmental pressure and the strategic nature of such a change raise the question: how can we explain the different behaviours of Swiss municipalities? Drawing from the New Institutional literature, we assumed the Oliver’s (1991) model as theoretical framework useful to look for answers. The empirical setting of our analysis consisted of the municipalities in Canton Ticino. We considered 245 municipalities existing in 2000 and focused on their behaviour during the period 2000-2009. Results show that economic and institutional pressures alone are not sufficient to convince municipalities to merge. The political trigger is an important driver of such a strategic decision. On one side, our analysis contributes to better explain the success or failure of managerial reforms in the public sector; on the other side, it provides public managers and policy-makers with useful suggestions about how to make managerial reforms succeed. The paper is organized into three parts. The first part (next two sections) reviews the extant literature on municipal amalgamation, presents the theoretical framework and formulates our hypotheses (third section); the second part explains the study methods and the third part (last two sections) presents and discusses results. 3 Reasons for municipal amalgamation: in search of economy Municipal amalgamation is a quite common phenomenon, above all due to the small size of many municipalities all over the world. More or less every Western and Northern European country reduced the number of municipalities in the last fifty years. Nordic countries (Nelson 1992) and the United Kingdom (Goldsmith 1996) engaged in aggressive policies toward municipal amalgamation, leading to eliminate more than three fourths of their municipalities. Amalgamations also occurred in France and Switzerland (Steiner 2000; Soguel 2001), in East European countries such as Bulgaria and Romania (Hajnal 2001; Swianiewicz 2006; Borecky and Prudky 2008), in the United States and in Canada (Miranda and Lerner 1995, Sancton 1996; Kushner and Siegel 2005). Despite the diffusion of the phenomenon, municipal amalgamation remains a rarely investigated topic in the academic literature. In addition, the extant studies focused mainly on mergers’ desired consequences for both the involved municipalities and their citizens, rather than on the reasons behind the decision to join or avoid amalgamation. From the municipalities’ standpoint, one of the more frequently quoted reason in favour of municipal amalgamation is represented by the opportunity to exploit scale and scope economies. The increase of the small size of many municipalities – with the consequential scale and/or scope economies – is in fact often associated with the opportunity to provide services at lower costs or deliver higher quality services at the same cost (Nelson 1992; Sancton 1996). Another reason deal with the fact that larger municipalities can provide citizens with a wider range of services (McKay 2004). In fact, empirical studies showed that municipalities below 3–5,000 inhabitants cannot perform well in managing important public responsibilities, thus making the service provision inefficient and hardly effective (Dowding et al. 1994; Keating 1995; Sharpe 1995; Boyne 2003; Baldersheim and Rose 2010). 4 Another argument in favour of amalgamation deals with its benefits in terms of equity. According to Swianiewicz (2006), countries with large municipalities know fewer income differences between municipalities, thus resulting in a lower level of social tensions. In addition, Swianiewicz (2006) argues that amalgamations tend to reduce the problem of free- riding, as large municipalities have lower incongruity between administrative boundaries and catchment areas of services. From the citizens’ standpoint, political participation, the wish to protect local democracy and local identities are often quoted as reasons against amalgamation (McKay 2004). According to this perspective, municipal separation does provide citizens with a better representation of their interests and lower political conflicts. On the basis of the aforementioned considerations, it looks manifest that strong economic reasons prevail behind municipal amalgamations (they are often promoted to support efficiency or functional capacity of local governments), whereas social and political considerations normally oppose to their implementation. Municipal amalgamation in Switzerland: reforms and institutional pressure Swiss municipalities have low geographical extension and population density: on average, they have 15,9 square kilometres and 2,843 inhabitants, with 44% of the Swiss population living in just 5% of all municipalities (Swiss Federal Statistical Office 2010). Cantons have 100 municipalities on average, with the minimum of three municipalities in Canton Basel- Stadt and a maximum of 388 municipalities in Canton Bern. Corippo – in Canton Ticino – is the smallest municipality (18 inhabitants) and Zurich – in Canton Zurich – the largest one (365,132 inhabitants). This situation resulted from a long-lasting amalgamation process started in the mid of the XIX century and that knew a peak during the ‘90s, due to structural economic weaknesses of 5 many municipalities: in particular, amalgamations have been promoted and implemented by those Cantons with small and weekly performing municipalities (Steiner 2000). Today about 85% of Swiss Cantons have discussed or implemented municipal amalgamations (Steiner and Kaiser 2010), resulting in a significant reduction of the number of Swiss municipalities over time: from 3,203 municipalities in 1850 to 3,021 in 1990 and 2,596 in 2010. At the beginning of the 90s, Canton Ticino had 247 municipalities with 2,300 inhabitants on average1 and small municipalities often facing situations of financial hardship (Dipartimento delle istituzioni, Sezione degli enti locali 1998; Steiner 2000). In this situation, amalgamations were promoted as one of the three pillars of the municipality reform law (LOC, 1987). The three pillars of the cantonal reform were: i) dimensional adjustment of municipalities through aggregations; ii) changes in the distribution of competences and financial flows between municipalities and Canton; iii) new rules and procedures to improve decision-making and optimize public service delivery. According to the Cantonal strategy (Dipartimento delle istituzioni, Sezione degli enti locali, 1998), municipal amalgamations should have ensured economies of scale, as municipalities with less than 200 inhabitants had higher per capita expenses than municipalities with more than 6,000 inhabitants. The diffusion of the amalgamation process led to a significant reduction in the number of municipalities over time: 245 in 2000, 199 in 2005, and 169 municipalities