Do good things come in small packages? The effects of size on municipal performance

Abstract

This research shows the direct and indirect effects of size on the performance of the Brazilian municipalities in the state of Santa Catarina, considering the academic debate around the issue. The research examined all municipalities of the state from 2005 to 2016, a period that comprised three municipal elections. The study sample consisted of 3,504 observations, with 293 municipalities, during these 12 years. The panel data analysis was estimated by Feasible Generalized Least Squares (FGLS). The results suggest that size affects municipal performance positively and directly. Also, size influences indirectly when considering the mayor’s schooling, i.e., the larger the municipality and the higher the mayor’s schooling, the better the municipal performance. The analysis of performance based on municipal tax (IPTU) collected per capita showed that, the larger the population, the higher the IPTU per capita, which means that larger municipalities tend to show better performance. Finally, the analysis of performance based on the percentage of IPTU levied from total tax revenue showed that size and size associated with the mayor’s capability did not affect performance.