Scale economies and the potential gain from local amalgamation in Thailand

dc.contributor.advisorSanti Chaisrisawatsukth
dc.contributor.authorKobkan Panphongth
dc.descriptionThesis (Ph.D. (Economics))--National Institute of Development Administration, 2020th
dc.description.abstractLocal government policies have been strongly linked to the principles of subsidies and decentralization in Thailand since 1997. The distribution model for local government organizations is linked to the suitability or need for change, which often depends on the economic efficiency and size of the local government organization in terms of population, i.e. economies of scale. This study contributes to the discussion on economies of scale under the conditions of Thai local administrative organizations based on the Cobb-Douglas production function and (long-run) cost function. The appropriate models were compared in relation to 1) quadratic cost function, and 2) combined quadratic and hyperbolic cost function. Cross-sectional data on Thai local administrative organizations in 2017 were analyzed from the perspective of economic benefit. The results of the analysis exhibit increasing returns to scale in production function and confirm the expected U-shaped cost curve. The amalgamations resulted in a decrease in local government organization spending, with the average costs measured by the number of staff and total expenses, also likely to decrease, thus achieving economies of scale. This suggests that most small local government organizations have higher unit costs than do their larger counterparts, providing evidence to support local amalgamation. However, after a certain population level is reached, diseconomies of scale may begin to emerge while unit costs rise. The resulting regression reflects the optimal local authority size and potential savings from a simulated amalgamation of local government units to achieve economies of scale. Jurisdictions in the population range of 10,386 to 12,417 are the least efficient size. Of course, these results differ from other foreign studies due to the variation of local territorial fragmentation, levels of autonomy, and fiscal federation in each country. Nevertheless, the optimal size of a local government organization obtained from this analysis is only a preliminary estimate obtained from quantitative analysis, rather than a definitive figure. Reaping the maximum benefits by providing the exact optimal population level may be difficult in practice. To cover both service providers and service recipients, qualitative data were also collected, and a survey was completed by 655 local government stakeholders, including local policy players, local staff, academicians, community leaders, other civil servants, and residents. Most of the respondents agreed to the amalgamation for three main reasons: a more efficient administrative structure, better public services, and increased revenue as a result of a greater budget allocation from the central government. They further suggested that future merger and public services could be simplified with lower costs from the online adoption of the system and that the optimal size may be broadly defined to allow flexibility in its implementation. However, there were still concerns that the organization may not be able to look after the population effectively due to the area of responsibility being more extensive and the potential difficulties involved with the inspection mechanism being greater than those in a larger organization. According to the various arguments, many respondents suggested that amalgamation was likely to be successful if the local people were involved in the process.                                                                    The cost of amalgamation, such as the reorganization costs, which are related to both direct and indirect costs, must be considered when local government amalgamation is proposed. In Thailand, since the government intends to implement a policy regarding local government amalgamation, the preliminary action is likely to involve voluntary amalgamation or cooperation approaches. The government may allocate special subsidies to support the amalgamation of small local agencies adversely affected by local
dc.format.extent221 leavesth
dc.publisherNational Institute of Development Administrationth
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
dc.subjectLocal amalgamationth
dc.subjectPotential gainth
dc.subject.otherEconomies of scaleth
dc.titleScale economies and the potential gain from local amalgamation in Thailandth
dc.typetext--thesis--doctoral thesis
mods.physicalLocationNational Institute of Development Administration. Library and Information Centerth of Development Economicsth Institute of Development Administrationth of Philosophyth
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