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

• DOI: http://doi.org/10.1111/puar.12307
• Published date: 01 January 2015
• Date: 01 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.

E-mail: cavellan@indiana.edu

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.

E-mail: gomesric.rg@gmail.com

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