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Environmental fiscal federalism and atmospheric pollution: A tale of two Indian cities

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Listed:
  • Shyam Nath
  • Yeti Nisha Madhoo

Abstract

This paper empirically tests the suitability of local vs state government expenditure in providing an environmental public good, namely airborne pollution control in two municipal areas in India. We employ an innovative methodology where factual and counterfactual state and local expenditure regimes are constructed to capture different degrees of decentralization. Econometric results highlight higher efficacy of state level expenditure (centralization) as spillover/regional effects become important. Particularly, superiority of state expenditure is evident in the control of suspended particulate matter (SPM), which has wide cross-boundary effects. Local expenditure and the counterfactual of local expenditure for uniform provision (both decentralized provision modes) emerge as more effective than state to control point-source local pollutant SO2. However, they may also supplement the effects generated by state expenditure in the case of NO2 emissions, which entail spillovers and seem amenable to pressure group influence at local level.

Suggested Citation

  • Shyam Nath & Yeti Nisha Madhoo, 2021. "Environmental fiscal federalism and atmospheric pollution: A tale of two Indian cities," ASARC Working Papers 2021-01, The Australian National University, Australia South Asia Research Centre.
    • Handle: RePEc:pas:asarcc:2021-01
    as

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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2021-04/wp-2021-01environmental_federalism_india.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental governance; fiscal decentralization; atmospheric pollution; spillover effects; non-point source pollution; India;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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