TY - JOUR
T1 - Compensation for environmental services and intergovernmental fiscal transfers
T2 - The case of India
AU - Kumar, Surender
AU - Managi, Shunsuke
N1 - Funding Information:
Besides the Finance Commission, the Planning Commission is also a major distributor of funds in India. It provides grants and loans to the states. The funds are distributed according to a formula evolved and modified by the National Development Council (NDC) from time to time. The criterion used by the Planning Commission considers population (60% weight) and fiscal management efforts (7.5% weight) for addressing vertical imbalance and the distance in per capita income from the national average (25% weight) for dealing with horizontal imbalance. In addition to these two agencies, states and local bodies also receive purpose specific grants from various federal ministries. Some of these grants are entirely funded by the federal government and some are shared cost programs.
Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2009/10/15
Y1 - 2009/10/15
N2 - This paper studies mechanisms to compensate local government for the public provision of environmental services using the theory of optimal fiscal transfers in India. Especially, we analyzed the role of intergovernmental fiscal transfers in achieving the environmental goal. Simply assigning the functions at appropriate levels does not ensure optimal provision of environmental services. Optimality in resource allocation could be achieved by combining the assignment system with an appropriate compensation mechanism. Intergovernmental fiscal transfers would be a suitable mechanism for compensating the local governments and help in internalizing the spillover effects of providing environmental public goods. Illustrations are also provided for India.
AB - This paper studies mechanisms to compensate local government for the public provision of environmental services using the theory of optimal fiscal transfers in India. Especially, we analyzed the role of intergovernmental fiscal transfers in achieving the environmental goal. Simply assigning the functions at appropriate levels does not ensure optimal provision of environmental services. Optimality in resource allocation could be achieved by combining the assignment system with an appropriate compensation mechanism. Intergovernmental fiscal transfers would be a suitable mechanism for compensating the local governments and help in internalizing the spillover effects of providing environmental public goods. Illustrations are also provided for India.
KW - Environmental expenditure
KW - Environmental services
KW - Fiscal federalism
KW - India
KW - Spatial externalities
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U2 - 10.1016/j.ecolecon.2009.07.009
DO - 10.1016/j.ecolecon.2009.07.009
M3 - Article
AN - SCOPUS:69649092762
SN - 0921-8009
VL - 68
SP - 3052
EP - 3059
JO - Ecological Economics
JF - Ecological Economics
IS - 12
ER -