Does Urban Local Governance Matter? Evidence from India

This paper examines the causal effect of urban local governance on public goods provision in India. We exploit quasi-random variation in multi-threshold criteria utilized for classifying Census Towns (CTs) and focus on settlements near the thresholds that are likely to obtain statutory recognition. Using a fuzzy regression discontinuity design, we instrument for urban local governance to identify the Local Average Treatment Effect (LATE). We document a strong first stage relationship between meeting CT thresholds and statutory recognition. Our results show that obtaining an Urban Local Body (ULB) increases local public good provision: government schools increase by approximately 14 (primary), 8 (middle), and 5 (secondary), healthcare infrastructure expands by 2 hospitals and 3 family welfare centers, and financial access deepens with 15 private banks, 2 cooperative banks, and 2 agricultural credit societies. Community amenities improve modestly with an additional public library, reading room, and cinema hall. Sports infrastructure declines by 5 facilities, consistent with our understanding of reallocation of urban space and investments. Our findings suggest that timely municipalization of emerging urban areas can expand provision of certain public goods, which may improve living standards and economic opportunities in urbanizing economies.