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

Purpose: 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). Design/methodology/approach: 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. Findings: 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. Research limitations/implications: The implications of this study include validating police performance measures and evaluating applicability of market power to police departments. Practical implications: No evidence was found to support the contention that consolidation of police departments results in efficiency gains. Originality/value: This is the first study of economies of scale in policing to use data from a low-density, low-population western state.