Economies of Scale in Fire and Police Services in Ontario

This paper is part of the IMFG Papers on Municipal Finance and Governance series. For a full list of papers, please visit http://bit.ly/2ylAa2D.This paper analyzes economies of scale for two municipal services by considering how per-household municipal costs are affected by a municipality’s size. An econometric model is used to estimate costs associated with fire and police services using data for 445 municipalities in the Province of Ontario. The results show that the costs per household of fire services are minimized for municipalities with a population of about 20,000 residents. For police services, costs are minimized with a population of about 50,000 residents. Based on these results, implications are drawn for municipal amalgamation policy.Institute on Municipal Finance and Governanc