Abstract

The paper explores the relationship between institutions and economic performance referring to a developed country like Italy and at the local scale. The hypothesis to be tested is whether institutional hyper-fragmentation, against the territorial boundaries of real communities approximated by daily commuting areas, increases some avoidable operating costs. The paper assumes administrative expenses and those for government bodies as measures of local governments' operating costs, analyses their components and determinants by estimating two municipal expenditure functions, and finally assesses the savings achievable by introducing a territorial amalgamation of local governments coherent with socioeconomic phenomena.