Is Small Beautiful? Testing the Direct and Nonlinear Effects of Size on Municipal Performance

Published date01 January 2015
Date01 January 2015
Claudia N. Avellaneda is associate
professor in the School of Public and
Environmental Affairs at Indiana University
Bloomington. She is interested in govern-
ance and public management in developing
countries, local governments, public policy,
and comparative politics, with a regional
focus on Latin America. Her current research
examines the determinants of local govern-
ment performance and highlights the role of
mayors’ background, innovation, network-
ing activities, and decision making.
Ricardo Corrêa Gomes is associate
professor at the University of Brasilia.
His f‌i elds of interest are performance
management, public sector governance, and
stakeholder analysis. He is coordinator of
the Public Administration and Government
Division of the National Association of
Research and Graduate Courses in Business.
Is Small Beautiful? Testing the Direct and Nonlinear Effects of Size on Municipal Performance 137
Public Administration Review,
Vol. 75, Iss. 1, pp. 137–149. © 2014 by
The American Society for Public Administration.
DOI: 10.1111/puar.12307.
Claudia N. Avellaneda
Indiana University
Ricardo Corrêa Gomes
University of Brasilia, Brazil
Abstract: Although the relationship between managerial capacity and local government performance is well estab-
lished, research into the direct ef‌f ect of population size on performance has yielded mixed f‌i ndings. Using data for 787
municipalities in the Brazilian state of Minas Gerais, this article examines the direct and nonlinear ef‌f ects (moderat-
ing and curvilinear) of population size on municipal performance. Performance is measured in terms of property tax
collection and averaged for the 2005–07 mayoral administration. Mayor’s age (a proxy for experience) and educa-
tional attainment serve as measures of managerial capacity. After controlling for political and economic factors, both
municipal size and mayoral capacity are positively correlated with property tax collection. However, population siz e
neither moderates managerial capacity nor relates curvilinearly to municipal performance.  ese f‌i ndings challenge the
promoters of fragmentation, which has been the trend in transitional and developing economies.
Practitioner Points
Municipalities with second-term mayors collected less property tax per capita.
In the f‌i rst year of a mayoral administration, municipalities collected less property tax per capita.
Larger municipalities, in terms of population, collected more property tax per capita.
Municipalities with more educated and senior or more experienced mayors collected more property tax.
municipalities after the adoption of the 2003 Local
Government Reform (Turgel n.d.), and India, which
increased the number of districts from 563 in 2000
to 651 in 2012 (India Ministry of Statistics and
Programme Implementation 2014).
In more developed economies, an opposing trend has
promoted the consolidation of small municipalities.
Municipal amalgamation has been the primary engine
of structural reform in Australian local governments
(Dollery, Byrnes, and Crase 2007), Japanese locali-
ties (Shimizu 2012), Danish municipalities (Blom-
Hansen 2010), Finnish municipalities (Saarimaa
and Tukiainen 2014), and U.S. local governments
(Dollery and Grant 2013). Are the arguments for
either of these trends backed by empirical evidence?
Does municipal size inf‌l uence performance?
Although several studies have tested the ef‌f ects of size
on organizational performance in the public sector,
the empirical evidence is inconclusive. Some studies
show support for a positive relationship (Christenson
and Sachs 1980; Smith and Meier 1994; Whetten
1978), while others report a negative relationship
(Fowler and Walberg 1991; Heck and Mayor 1993;
Is Small Beautiful? Testing the Direct and Nonlinear Ef‌f ects
of Size on Municipal Performance
Global interest in government performance
has intensif‌i ed since the early 1980s with the
advent of New Public Management.  eories
have attempted to explain public organizations’
performance in terms of equity, outcomes, ef‌f‌i ciency,
output quantity, ef‌f ectiveness, accountability, respon-
siveness, and consumer satisfaction (Boyne 2003).
One of these theories centers on the optimal organi-
zational size for improving performance (see Holzer
et al. 2009 for a review). Within this line of research,
scholars have argued that small governments are more
ef‌f‌i cient because their proximity to citizens allows
them to better understand and meet citizens’ needs
(Flynn 1993; Grosskopf and Yaisawarng 1990).
is notion of ef‌f‌i ciency has led some developing and
transitional countries to opt for fragmentation and the
creation of new municipalities, rallying around the
phrase “small is beautiful,” as coined by Schumacher
(1973).1 An example of this trend is Brazil, where
the number of municipalities grew from 4,491 in
1990 to 5,560 in 2000 (Tomio 2002), resulting in
some municipalities having fewer than 2,000 inhabit-
ants. Other transitional country examples include
Russia, which more than doubled the number of

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