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Fiscal Decentralization and Local Finance in Developing Countries

Development from Below

Roy Bahl and Richard M. Bird

This book draws on experiences in developing countries to bridge the gap between the conventional textbook treatment of fiscal decentralization and the actual practice of subnational government finance. The extensive literature about the theory and practice is surveyed and longstanding problems and new questions are addressed. It focuses on the key choices that must be made in decentralizing, on how economic and political factors shape the choices that countries make, and on how, by paying more attention to the need for a more comprehensive approach and the critical connections between different components of decentralization reform, everyone involved might get more for their money.
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Chapter 8: Financing metropolitan areas

Development from Below

Roy Bahl and Richard M. Bird

Extract

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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