Fiscal Aspects of Metropolitan Governance
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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- Richard M. Bird, 2003. "Fiscal Flows, Fiscal Balance, and Fiscal Sustainability," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Richard M. Bird, 2009. "Taxing Business," World Bank Other Operational Studies 11117, The World Bank.
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- Bird, Richard & Wallich, Christine, 1992. "Financing local government in Hungary," Policy Research Working Paper Series 869, The World Bank.
- Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 195-227.
- Frey, Bruno S. & Eichenberger, Reiner, 1996. "FOCJ: Competitive governments for Europe," International Review of Law and Economics, Elsevier, vol. 16(3), pages 315-327, September.
- Kitchen, H., 1993. "Efficient Delivery of Local Government Services," Papers 93-15, Queen's at Kingston - School of Policy Studies.
- Massimo Bordignon & Silvia Giannini & Paolo Panteghini, 2001. "Reforming Business Taxation: Lessons from Italy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 191-210, March.
- Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 429-442, July.
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