Fiscal Decentralization and Land Policies

The study of fiscal decentralization has important policy implications for urban growth management, environmental conservation, and property taxation. First, fiscal decentralization gives local governments powers to set local taxes and make local expenditures. Second, in many countries local governments also have powers to regulate land uses within the general guidelines set by higher authorities. These two powers interact so that municipalities often make land use decisions while considering their fiscal effects. Hence, an understanding of the degree to which local and provincial governments can exercise power, make decisions about their revenues and expenditures, and are held accountable for outcomes is crucial for land policy research and education.

In June 2007 the Lincoln Institute hosted the second in its series of land policy conferences to address international trends and emerging issues. The goals were to review decentralization experiences in Organization for Economic Co-operation and Development (OECD) countries and developing nations and to explore areas of consensus and disagreement among scholars and analysts on the opportunities and risks of decentralization.

Three key themes emerged from the conference.

• the extent and effectiveness of local service provision under decentralization;
• the connections between decentralization and local policies; and
• the effects of intergovernmental transfers on issues such as local fiscal prudence, the association between decentralization and income distribution, and new institutional arrangements for decentralization.

About the Editors

Gregory K. Ingram was the president and CEO of the Lincoln Institute of Land Policy from 2005 to 2014.

Yu-Hung Hong was a visiting fellow at the Lincoln Institute of Land Policy.

Table of Contents

Introduction

1. The Nexus of Fiscal Decentralization and Land Policy, Gregory K. Ingram and Yu-Hung Hong

Achieving Decentralization Objectives

2. Opportunities and Risks of Fiscal Decentralization: A Developing Country Perspective, Roy Bahl

3. Local Revenues Under Fiscal Decentralization in Developing Countries: Linking Policy Reform, Governance, and Capacity, Paul Smoke

Commentary: Robert D. Ebel

4. Local Service Provision in Selected OECD Countries: Do Decentralized Operations Work Better?, Ehtisham Ahmad, Giorgio Brosio, and Vito Tanzi

Commentary: Paul Bernd Spahn

Decentralization, Local Governance, and Land Policy

5. Political Structure and Exclusionary Zoning: Are Small Suburbs the Big Problem?, William A. Fischel

Commentary: Lee Anne Fennell

6. School Finance Reforms, Property Tax Limitation Measures, and the Distributions of Expenditures and Class Sizes, Daniel P. McMillen and Larry D. Singell Jr.

Commentary: Dennis N. Epple

7. Decentralization and Environmental Decision Making, Shelby Gerking

Commentary: Lawrence Susskind

8. A Cross-Country Comparison of Decentralization and Environmental Protection, Hilary Sigman

Commentary: Maureen L. Cropper

9. Interjurisdictional Competition Under U.S. Fiscal Federalism, Sally Wallace

Commentary: Jeffrey S. Zax

Emerging Challenges and Opportunities

10. Local Government Finances: The Link Between Intergovernmental Transfers and Net Worth, Luiz R. De Mello

Commentary: Ronald C. Fisher

11. Fiscal Decentralization and Income Distribution, Jorge Martinez-Vazquez and Cristian Sepulveda

Commentary: Christine P. W. Wong

12. Public and Private School Competition and U.S. Fiscal Federalism, Thomas J. Nechyba

Commentary: Helen F. Ladd

13. Community Associations: Decentralizing Local Government Privately, Robert H. Nelson

Commentary: Robert W. Helsley

14. Increasing the Effectiveness of Public Service Delivery: A Tournament Approach, Clifford F. Zinnes

Commentary: José Roberto R. Afonso and Sérgio Guimarães