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

Shyam Nath and Yeti Nisha Madhoo

ASARC Working Papers from The Australian National University, Australia South Asia Research Centre

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.

Keywords: Environmental governance; fiscal decentralization; atmospheric pollution; spillover effects; non-point source pollution; India (search for similar items in EconPapers)
JEL-codes: E31 E61 E65 (search for similar items in EconPapers)
Pages: 40
Date: 2021
New Economics Papers: this item is included in nep-dem, nep-ene, nep-env, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pas:asarcc:2021-01

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