Abstract ：
This paper presents a theoretical analysis of whether small municipalities’ existence increases efficiency. In recent years, large-scale municipal consolidations have decreased the number of municipalities: however, some small municipalities do not consolidate and remain alive. This paper utilizes land capitalization to present the value of these situations, determining the following results: Only when the travel cost is sufficiently high and the population differences in the non-consolidation case are sufficiently small, nonconsolidation is more valuable than consolidation. That effect is mire significant when the private production technology is not large, the scale economies in the production of the local public good are low, and the total population is large. In this case, the existence of small municipalities is more efficient.

Keywords : regional population; local public good; land capitalization
JEL Classification : R23, R53, H41, H73