Economies of Scale for Local Governance in the Northeast Region of Thailand

Abstract

This case study is set for two objectives. First, to test the hypothesis of economies of scale in local administration with a focus on the Northeast region of Thailand. We assume there are potentials gain from local amalgamation and that the benefit may outweigh costs of transformation. An econometric model is used to estimate the relationship of the cost of local public goods; specifically, i) staff per 1,000 population ii) personnel expenses relative to the population iii) service expenditure per population are treated as dependent variables and tested against a set of explanatory variables. The second objective is to obtain data on the progress of three local units in Ubon Ratchathani province that have planned to merge: Khamyai Tambon Municipality, Patum Tambon Municipality and Rainoi Sub-District Organization. We use quantitative and qualitative information from site visits and interviews with top administrators about the motivations, expectations, and process of amalgamation. The research findings show that increases in population size may lead initially to a reduction in local administrative organizations’ costs, resulting in economies of scale; moreover, larger local administrative organizations may enjoy greater economies of scale than is the case for smaller local administrative organizations.