The Impact of Amalgamations on Services in Icelandic Municipalities
Authors: Eyþórsson Grétar Þór , Karlsson Vífill 
Published: November 2019

The objectives of reforming sub-levels of the public sector have historically been driven by the will and need to amalgamate municipalities. The reasons given for amal­gamating have primarily been size-efficiency and capacity, as well as quality and quantity in services. This is shown, for example, in a recent study of selected European countries where these objectives are of high importance with regard to amalgamations in 11 European countries (Steiner et al., 2016). Baldersheim and Rose (2010) have described these objectives as “the consolidationist argument”. The basic argument is that, due to scale economies, increased size of political-administrative units will lower average costs (i.e., cost per capita) of providing municipal services and therefore increase the capacity to redistribute economic and organizational resources more effectively. What this means is that increased size yields lower average cost, which gives opportunities to provide services of more quality and quantity and distribute them more equally within all neighbourhoods and between neighbourhoods.

Whether these objectives are realized after amalgamation in a new municipality is, however another question which has often been hard to answer in empirical studies. In the study of 11 European countries by Steiner et al. (2016) the most important outcomes of amalgamations tend to be improved service quality and to some extent cost savings. Case studies evaluating the impact of municipal amalgamations seem to be rare. However, Eythórsson and Jóhannesson (2002)[1] evaluated the impact of 7 different amalgamations out of a total of 37 municipalities in Iceland from the 1990’s. The evaluation covered various aspects such as democracy, administration, services, economic development and cost-efficiency. Among other things, their results indicated that services tended to improve and cost-efficiency tended to be realised, at least to some extent. Important aspects in this context were found to be equality between different parts of the municipality, as well as time from amalgamation. Even though, in general, quality and quantity in services increased after amalgamation, this did not seem to be the case for all parts or neighbourhoods of the municipality. People and local leaders in the more peripheral and less central parts were more discontent with the development of services in the new municipality. The time perspective seemed to matter, at least in some service fields. In the case of Iceland, there was some evidence that improvements in economic development and in infrastructure took time and that no positive signs could be detected until at least five years after the amalgamation.

These almost 20 year old results indicate that the impact of municipal amalgamations often turns out to be more complex than general approaches may show. Therefore, we find it relevant to analyse newer material to try to determine whether this is the case with amalgamations a decade or decades later – in times when lessons could have been learned from previous cases in order to try to prevent inequality in service provision. This article attempts to answer the question what impact municipal amalgamations have had on municipal services, especially looking at service quality, service capacity, service efficiency and equality in services between the centre and the periphery in the municipality. The analysis is based on material from two separate research projects: firstly, from 2015, survey among elected local politicians in Iceland and, secondly, data from a survey conducted in 2013, where the respondents were citizens in eight amalgamated municipalities, which had been amalgamated in and around the middle of the first decade of the 21st century.