The aim of this paper is to review from a fiscal perspective the different models of governing structure found in metropolitan areas around the world. While there is considerable dispute in the literature as to exactly how, and how much, the design of governing institutions matters in affecting outcomes, it is indisputable that money matters: who has it, where does it come from, and under what conditions it can be spent and by whom. How public expenditures are financed directly affects the feasibility of any developmental proposal or service provision goal and is thus always a key issue in any city or metropolitan area strategy. In particular, experience suggests strongly that the ability to “self-finance”--that is, to be free to at least some extent from the whims and wishes of others -- is a critical factor in determining which metropolitan institutions live and thrive and which fade away or die in bickering between contending financial supporters. We set out the key parameters of four models of government structure used around the world (one-tier, two-tier, voluntary cooperation, and special districts). We evaluate how these different models work in practice, drawing on real-world examples to illustrate the argument. We consider how well each model achieves coordination of service delivery over the entire metropolitan area, the extent to which they allow for the equitable sharing of costs of services throughout the metropolitan area, and their ability to reduce negative or positive spillovers of service delivery across local boundaries. We examine some aspects of local government expenditures and also look at main sources of revenue, evaluating the advantages and disadvantages of different revenue-raising tools for different governing structures. Finally, we summarize our findings on the fiscal aspects of governance for metropolitan regions around the world and made a few suggestions with respect to possible future fiscal developments in Latin American metropolitan regions.
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Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number
0401.
Find related papers by JEL classification: R51 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
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