Harald Groven

Eight years after Denmark merged 239 councils into 66, places that lost their town hall had 26% fewer children and 35% lower house prices. In 2027 Denmark folded 271 municipalities into 98, merging 239 of them into 66 larger ones. The basic idea (which makes every finance ministry happy), is that bigger councils spread fixed costs over more people, they cut duplicated jobs and deliver the same services via economies of scale. Earlier Danish research backed that up, finding administrative costs per head fell after the mergers. But each new municipality kept only one town hall. Every other former council lost its administrative heart, and a bunch of economists wanted to know what happened to the places left behind. They used Danish registry data covering every resident and every firm from 1996 to 2015, mapped onto 8,530 small neighbourhoods of at least 150 households each. They then compared the 2,187 neighbourhoods whose municipality lost its town hall with neighbourhoods in municipalities the reform left untouched. Because the untouched ones skew urban (Copenhagen, Aarhus, Odense), the authors built a weighted blend of them that tracked the losing areas closely before 2007, so the comparison is like for like. The first domino is obvious. Neighbourhoods that lost their town hall shed about three full-time admin staff each, roughly a third of what they had, and the drop never reversed. Then the losses spread to services nobody had voted to cut. School staffing fell by 17% on average across the nine years after the reform, and public-sector jobs overall by 21%. Private-sector jobs followed, down 16%, as the local economy lost the steady trade that a council and its staff bring. People responded the way you'd expect. Each affected neighbourhood lost about three more working-age residents than it gained every year, around 0.7% of its population. The number of children fell 13%, which tells you young families were among the first to go. Those who stayed travelled 10% further to work, and their wages rose by just 1%, barely compensating for the extra time on the road. House prices fell 15% on average. By 2015 the gap had widened. Against comparable untouched areas, public employment was down 38%, school staffing 36%, private jobs 24%, children 26% and house prices 35%. The results hold when the comparison group changes. Comparing losing municipalities with neighbours that kept their town hall, or with the second-largest partner in the same merger, still shows clear damage, and so does using the number of council seats to predict which places lost out. The geography is uneven tho. Neighbourhoods near Denmark's four biggest cities saw residents drift into those cities. Further out, people moved to whichever town had kept the town hall, and those winners added public-sector jobs. So a reform meant partly to slow urbanisation ended up feeding big cities in some places and building up regional hubs in others. link to full article: doi.org/10.1093/jeg/lbaf038