The debate on optimal political system size persists despite arguments for both small and large units. This article evaluates the economic efficiency argument using a recent Danish reform where 239 municipalities were amalgamated through an exogenous government intervention, allowing analysis without endogeneity concerns.

* Research Context: Denmark provided a unique natural experiment with clear pre- and post-treatment observations for both affected and untouched municipalities (32).

* Our methodology leverages this reform's policy-driven nature to isolate causal effects.

* Key Findings: Contrary to expectations, the scale effect analysis revealed substantial administrative cost reductions per inhabitant following amalgamation. The findings challenge straightforward assumptions about political economy efficiency gains from size reduction.

* Implications for Governance Research: This case study underscores Denmark's distinctive position in governance studies and offers insights into potential savings from municipal consolidation beyond theoretical predictions.