Municipal Amalgamations and Common Pool Problems: The Danish Local Government Reform in 2007

Amalgamating municipalities carries risks in terms of public expenditure control. The tax base of the new amalgamated municipality represents a common pool resource. The incentive is to exploit it – that is, to spend before closing time. This article investigates last-minute spending by Danish municipalities before the local government reform in 2007 in which 271 municipalities were reduced to 98. It shows that local councillors exploited this situation to finance local projects before closing time. The article thus demonstrates the occurrence of common pool problems in amalgamation situations. However, it also shows that it is the availability of a common pool that matters, not its size.