Compensation for environmental services and intergovernmental fiscal transfers: The case of India

Surender Kumar and Shunsuke Managi

Ecological Economics, 2009, vol. 68, issue 12, 3052-3059

Abstract: 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.

Keywords: Environmental; services; Fiscal; federalism; Spatial; externalities; Environmental; expenditure; India (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:68:y:2009:i:12:p:3052-3059

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