Estimating Fiscal Health of Cities: A Methodological Framework for Developing Countries
The main objective of the paper is to propose a framework in which fiscal health conditions can be assessed and the main determinants affecting fiscal health can be identified, inspite of severe data constraints. The paper draws on big urban agglomerations in India as well as smaller cities as a sample and attempts to identify the difference, if any, in the main determinants for variations in fiscal health conditions across different size classes of cities. To compensate for the lack of statistical rigor in the estimations of expenditure needs and revenue capacities, we propose a framework which analyses the ratio of expenditure needs to revenue capacity by fitting an econometric model. It is a two-step method, in the first stage we estimate the expenditure need and revenue capacity separately by simple methods discussed above. In the second stage we take the ratio of expenditure need and revenue capacity as an indicator of financial performance of a ULB and fit an econometric model to explain the performance of ULBs on the basis of factors which are likely to affect the performance of the ULBs. We find that the role of the higher tiers of the government is important in bigger and smaller size class of cities in their financial management. However, for bigger cities we find that the own source revenues can also play an important role in bringing down the fiscal ratio. In the smaller ULBs the role of the demand indicators is not that prominent but the cost indicators play a relatively prominent role. In case of bigger agglomerations, the demand indicators are more prominent than the cost indicators.
|Date of creation:||19 Sep 2013|
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- Bandyopadhyay, Simanti & Rao, M. Govinda, 2009.
"Fiscal health of selected Indian cities,"
Policy Research Working Paper Series
4863, The World Bank.
- M.Govinda Rao & Simanti Bandyopadhyay, 2009. "Fiscal Health of Selected Indian Cities," Working Papers id:2058, eSocialSciences.
- Simanti Bandyopadhyay & M. Govinda Rao, 2009. "Fiscal Health of Selected Indian Cities," Development Economics Working Papers 22970, East Asian Bureau of Economic Research.
- Bandyopadhyay,Simanti & M. Govinda Rao, 2009. "Fiscal health of selected Indian cities," Working Papers 09/58, National Institute of Public Finance and Policy.
- Simanti Bandyopadhyay, 2011. "Finances of Urban Local Bodies in Jharkhand: Some Issues and Comparisons," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1113, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Andrew Reschovsky & Jennifer Imazeki, 2003. "Let No Child Be Left Behind: Determining the Cost of Improving Student Performance," Public Finance Review, SAGE Publishing, vol. 31(3), pages 263-290, May.
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