Is bigger better? An analysis of economies of scale and market power in police departments

The purpose of this paper is to investigate whether the nature of policing services allows for economies of scale to be realized. It is also a replication of Southwick (2005).

This study replicates the methodology used by Southwick (2005) to estimate police production and demand in order to determine whether there are economies of scale among police departments in a western state. Southwick’s (2005) method is unique in that it incorporates measures of market power to predict police efficiency. The present study is unique in that it involves data from a low-density, low-population western state.

Southwick’s results for New York State are markedly different from the results found for Idaho, thus questioning the external validity of Southwick’s model as applied to a relatively low-population state. The findings also indicate that, controlling for relevant variables, crime in Idaho is highly correlated with population, suggesting that police departments in low density/population states would not achieve efficiency gains through consolidation.

The implications of this study include validating police performance measures and evaluating applicability of market power to police departments.

No evidence was found to support the contention that consolidation of police departments results in efficiency gains.

This is the first study of economies of scale in policing to use data from a low-density, low-population western state.