Is Small Beautiful? Testing the Direct and Nonlinear Effects of Size on Municipal Performance

Although the relationship between managerial capacity and local government performance is well established, research into the direct effect of population size on performance has yielded mixed findings. Using data for 787 municipalities in the Brazilian state of Minas Gerais, this article examines the direct and nonlinear effects (moderating and curvilinear) of population size on municipal performance. Performance is measured in terms of property tax collection and averaged for the 2005-07 mayoral administration. Mayor's age (a proxy for experience) and educational attainment serve as measures of managerial capacity. After controlling for political and economic factors, both municipal size and mayoral capacity are positively correlated with property tax collection. However, population size neither moderates managerial capacity nor relates curvilinearly to municipal performance. These findings challenge the promoters of fragmentation, which has been the trend in transitional and developing economies.