The Myth of Economies of Scale in Municipal Organizations: Organizational Structure, Resource Efficiency, and the Size Paradox

Municipalities adopt organizational structures based on economies of scale (EoS) to enhance efficiency amid budget cuts and labor shortages. While EoS effects on externalization have been studied, their impact on internal structures remains underexplored. This study investigates the relationship between EoS-based internal organizational design and resource efficiency, focusing on the moderating role of municipal population size. Using qualitative and quantitative data from Dutch municipalities, we find that EoS internal structures often reduce resource efficiency - particularly in larger municipalities - whereas smaller ones may benefit. These findings highlight the importance of considering population size when applying EoS principles to internal municipal design.