This book examines the emerging trends in vanishing borders of urban local government finance due to uncertain local tax and expenditure regimes. It analyzes the global developments with illustrations from state budgetary operations of the Indian federation. This trend has gained momentum due to concentration of population in cities and big towns as a consequence of globalization, leading to enhanced environmental vulnerability due to climate change. Expanding expenditure needs have not been corresponded by revenue regimes and transfers. Moreover, involving corporate sector in local area preference initiatives through mandatory corporate social responsibility (CSR) is an interesting development. It is expected to work as a local fiscal additionality to supplement locally provided civic and infrastructure services. This additionality may also evolve into public private partnerships at the local level. Such development however has the potential of displacing local government operations.
The focus of the book hinges around critically examining setbacks to fiscal decentralization and challenges in improving the status of urban local finances to enhance fiscal autonomy of these governments, particularly in Indian scenario. The book also explores the possibility of an expanded role of local fiscal policy in the context of globalization and climate change, besides addressing the conventional responsibilities with respect to quality of civic services.
Author(s): Shyam Nath, Yeti Nisha Madhoo
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 376
City: Singapore
Foreword
Acknowledgments
Contents
About the Authors
List of Figures
List of Tables
1 Emerging Challenges in Urban Local Finance
1.1 Genesis
1.2 Sluggish Origin of Local Finance Institutions in India
1.3 Absence of Targeted Local Fiscal Reforms
1.4 Self Reliant vs. Borderless Local Fiscal Jurisdictions
1.5 Vanishing Borders of Urban Local Finance: The Channels in India
1.6 Focus on Global Interlinkages
1.7 Ingredients of Local Fiscal Design
1.8 Territorial Coverage of the Study
1.9 Overview of Chapters
1.10 Salient Remarks
Note
References
2 Public Goods Provision and Local Fiscal Domain
2.1 Introduction
2.2 Public Goods
2.3 Common Pool Resources
2.4 Global Public Goods
2.5 Local Public Goods, Decentralization, and Decisions by Voting
2.5.1 Assembly Voting and Local Expenditure
2.5.2 Competing Forms of Decentralization
2.6 Summing Up
References
3 Tenets of Fiscal Federalism and Decentralization
3.1 Introduction
3.2 Conventional or the First-Generation Theory of Fiscal Federalism (FGTF)
3.3 Second-Generation Theory of Fiscal Federalism (SGTF)
3.4 Hard and Soft Budget Constraints
3.5 Redistributing Fiscal Responsibility Between Public and Private Sectors
3.6 Concluding Remarks
References
4 Economic Globalization and Local Public Finance
4.1 Background
4.2 Globalization Trends and Urban Linkages
4.3 Globalization and Fiscal Decentralization
4.4 Globalization, Country Size, and Government Budgets
4.5 Globalization and Privatization: Moving Outside Local Fiscal Domain
4.6 Local Fiscal Policies and Global Governance
4.7 Concluding Remarks
References
5 Corporate Social Expenditure and Fiscal Decentralization: A Novel Framework
5.1 Introduction
5.2 Corporate Social Responsibility and Privately Supplied Public Goods
5.3 Is CSR a Tax or an Earmarked Corporate Social Expenditure?
5.4 Performance Auditing: Local Area Preference
5.5 Does CSR Extend Fiscal Decentralization?
5.5.1 Who Bears the Burden of CSR Tax?
5.5.2 Whether CSR Expenditures Are Fungible?
5.5.3 Whether Firms Stand for Not-For-Profit Social Activities?
5.5.4 Whether Firms Are Appropriate for Local Public–Private Partnerships?
5.6 Spatial Dispersal of CSR and Limited Decentralization
5.7 Proposed Decentralization of CSR Activities Through Design of CSR Footprint
5.8 Concluding Comments
References
6 Global Climate Change and Local Fiscal Intervention
6.1 Introduction
6.2 Constitutional Framework and Functional Assignment in India
6.3 Rationale for Local Government Participation in Global Climate Governance
6.4 Inequality, Poverty, and Adaptation
6.4.1 Innovation and Adaptation: Does It Reach Those Who Need It Most?
6.5 Local Climate Finance
6.6 Intergovernmental Fiscal Transfers and Local Climate Initiatives
6.7 Integrating Global and Local Climate Governance
6.7.1 City-Based and Individualized Initiatives
6.7.2 Participation in Locality-Based Clean Development Mechanism
6.7.3 International Funding, Adaptation Interventions, and Vulnerable Populations
6.8 Conclusion and Way Forward
References
7 Overlapping Local Water Supply Regimes
7.1 Introduction
7.2 Progress Toward SDG 6
7.2.1 International Perspective
7.2.2 Water Provision Inequalities Across States
7.2.3 Inequalities Across Income Groups Within Local Areas
7.3 Institutional Mechanisms of Water Provision
7.3.1 Rationale and Taxonomy
7.3.1.1 Rationale for Public Intervention
7.3.1.2 Taxonomy of Provision Mechanisms
7.3.2 Ownership Regimes of Water Utilities and Performance
7.3.2.1 Public Provision vs. Privatization
7.3.2.2 Ownership and Regulatory Effectiveness
7.3.2.3 Corporatization Episodes
7.4 Water Institutions in India
7.4.1 Utility Privatization Experiences
7.5 Models of Water Governance and Performance in India
7.5.1 Demand-Side Management: Pricing Practices
7.5.1.1 Direct Pricing Mechanisms
7.5.2 Conservation and Water Pricing
7.5.3 Affordability and Equity
7.6 Financial Sustainability and Utility Performance
7.7 Conclusion
References
8 Local Fiscal Effort in Response to State Expenditure: Some Empirical Evidence
8.1 Introduction
8.2 Relevant Empirical Literature
8.3 Indian Fiscal Constitution and Politics
8.4 Measuring Local Government Willingness to Tax
8.5 A Model of Fiscal Collusion and Retaliation
8.5.1 Construction of Variables and Sources of Data
8.6 Discussion of Empirical Results
8.7 Conclusion
References
9 Environmental Federalism and Atmospheric Pollution: Efficacy of Local vs State Expenditure
9.1 Introduction
9.2 Existing Literature on Environmental Federalism and Proposed Extension
9.3 Air Pollutants in India’s Mega-Cities—with Focus on Delhi and Mumbai
9.3.1 Nature of Pollutants
9.3.2 Trends in Air Pollution and Source Apportionment
9.4 Modeling Efficacy of Air Pollution Mitigation by State and Local Expenditure
9.4.1 The Model and Construction of Counterfactuals
9.4.2 Sources of Data
9.4.3 Estimation Strategy
9.5 Empirical Results and Discussion
9.6 Conclusion and Emerging Policy Issues
Appendix
References
10 Local Tax Potential in an Urban Setting
10.1 Introduction
10.2 Neglect of User Charges
10.3 Searching a Local Tax Base
10.4 Property Tax Vs Business Profit Tax
10.5 Business Property Tax
10.5.1 Administration of Business Property Tax
10.6 Pigouvian Tax on Industry and Business
10.6.1 Alternative One: Tax on Corporate Expenditure on Land and Building
10.6.2 Alternative Two: Local Carbon Tax
10.7 Summing Up
Notes
References
11 Shaping Urban Public Finance
11.1 Summary of Emerging Issues
11.2 General Policy Context
11.3 Specific Policy Context
11.3.1 Grants Dependence and Fiscal Indiscipline
11.3.2 Local Fiscal Response to Growth in State Expenditure
11.3.3 Functional Decentralization and Creation of Parallel Institutions
11.3.4 Sharing the Fiscal Divisible Pool
11.3.5 Local Share in Corporation Income Tax
11.3.6 Revitalization of Local Property Tax
11.3.7 Local Carbon Tax as an Environmental Levy
11.3.8 Local Climate Governance: Adaptation vs Mitigation
11.3.9 Environmental Fiscal Federalism: State vs Local Action
11.3.10 CSR as an Additionality to Local Finance
11.4 Potential for Future Research
References
Index
