This paper provides new evidence on the drivers of local government amalgamation and its effects on public goods provision, economic activity and national identity. I focus on an administrative reform in Ukraine between 2015-2020, during which smaller local councils (LCs) had the opportunity to voluntarily amalgamate in order to keep a substantially larger portion of their tax revenues and gain greater autonomy over the local administration. By investigating the determinants of the willingness to amalgamate, I show that some pre-reform characteristics, such as nightlight intensity, the share of native Ukrainian speakers and the population, were substantial predictors of the amalgamation. I estimate a staggered difference-in-differences model and show that the reform led to a cumulative increase in nightlight intensity per capita over the years following exposure. Employing the same staggered design with previously unused data on standardized college entrance exam results, I find no clear effect on Ukrainian and math scores. I further demonstrate that the reform positively impacted district level personal income tax collection. Finally, using a nationally representative repeated cross-sectional survey, I document the greater self-identification as Ukrainian as opposed to Russian in rural areas with a higher share of people living in the new local units, hromadas. +
This paper provides new evidence on the drivers of local government amalgamation and its effects on public goods provision, economic activity and national identity. I focus on an administrative reform in Ukraine between 2015-2020, during which smaller local councils (LCs) had the opportunity to voluntarily amalgamate in order to keep a substantially larger portion of their tax revenues and gain greater autonomy over the local administration. I show that pre-reform characteristics such as nightlight intensity, population, and the share of native Ukrainian speakers significantly predicted amalgamation, with evidence of homophily, where more similar units were more likely to amalgamate. Using a staggered difference-in-differences model, I find that the reform led to a cumulative increase in nightlight intensity per capita and higher district-level personal income tax collection, but no clear effect on standardized college exam scores in Ukrainian and math. A nationally representative repeated cross-sectional survey data further reveal stronger self-identification as Ukrainian in rural areas with a higher share of residents in the newly formed \textit{hromadas}, emphasizing the reform's impact on national identity.