A Conceptual Note on Scale Economies, Size Economies and Scope Economies in Australian Local Government

Abstract

The notion that ‘bigger is better’ has underpinned municipal structural reform policy in Australia and led to its heavy reliance on amalgamation. Several advantages are believed to flow from larger councils, including scale economies and scope economies. However, a surprising feature of the debate over amalgamation is not only the paucity of empirical evidence supporting the idea that ‘bigger is cheaper’, but also the marked degree of conceptual confusion between size economies, scale economies and scope economies. This article seeks to ameliorate this confusion by carefully distinguishing between these theoretically distinct concepts in the institutional context of Australian local government.