Economies of scale in local government - a critical analysis of public schools

The debate about the optimal municipality size focuses on two main arguments. First that larger municipalities are more efficient and second that they can maintain a higher quality in the provision of public sector service. A review of the two arguments shows that it is more appropriate to see these as one theory of economies of scale. Former analyses have not included this in their explanatory models, whereby the differences in expenditures between municipalities can be interpreted both as differences in efficiency and in quality. The same problem applies to analyses of quality. Furthermore these analyses have other methodological problems. An analysis of the school expenditures that tries to solve these problems shows contrary to expectations no correlation between sizes of municipalities on the one hand, and expenditures and quality on the other.