The idea behind this research was established through the reform in 2008 along the financial equalization and task allocation, which engendered fundamentally new streams of financial resources and financial responsibilities among the cantons and municipalities. Hence, the federalism reform not only leads to an enormous pressure on change in the communities, but also triggers out the question of efficient allocation of goods and services among municipalities. This research identifies the optimal size of Swiss municipalities by forming an efficiency benchmark based on a DEA efficiency analysis.

The research first classified the total municipalities into five municipality group sizes to generate comparable values. Further, by defining five different municipality domains (sectors), gathering related input and output variables for each domain and formatting the collected data into a convertible calculation table, the fundaments for the DEA were set. Outcomes from the DEA analysis were used to compare efficiency scores of different municipality group sizes, to find out best performers, inefficiencies and related possible saving potentials within the five different municipality domains.

The research illustrates inefficiencies among five predefined municipality group sizes and demonstrates potential savings within five different municipality domains (municipality duties and responsibilities) based on a Swiss pilot canton. The DEA efficiency analysis conclusion comprises the answer to the optimal municipality size for Swiss municipalities, a summary of the conducted benchmark values and provides suggestions on how to improve efficiencies for inefficient municipalities. Generally, the DEA analysis outcome confirms that large size municipalities operate more efficiently than any other municipality group sizes and therefore the large size is the optimal size. In order to improve the operational efficiency of municipalities, mergers within small size municipality groups are therefore justified and interpreted according to the results out of the DEA efficiency benchmarking in the Swiss municipality sector.