There is ample evidence that productivity and incomes increase with city size and density, and that city growth and national economic growth are strongly linked. Unfortunately, the fiscal framework in most developing countries limits the extent to which cities can meet expenditure needs or capture the revenue opportunities that accompany urbanization. This chapter lays out options for a better governance and financing model for big cities in the developing world. It considers how local governance may be structured within metropolitan areas; when and how more local autonomy in making expenditure decisions is possible; and the taxes and charges that might best support a more fiscally self-sufficient local governance structure, supporting the analysis with a review of the practice in metropolitan finance in some low-income countries.
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