Valuing water for Chinese industries : a marginal productivity assessment

Using plant-level data on more than 1000 Chinese industrial plants, the authors estimate a production function treating capital, labor, water, and raw material as inputs to industrial production. They then estimate the marginal productivity of water based on the estimated production function. Using the marginal productivity approach to valuing water for industrial use, they also derive a model and estimates for the price elasticity of water use by Chinese industries. Previous studies used water demand functions and total cost functions to estimate firms'willingness to pay for water use. They find that the marginal productivity of water varies among sectors in China, with an industry average of 2.5 yuan per cubic meter of water. The average price elasticity of industrial water demand is about -1.0, suggesting a great potential for the Chinese government to use pricing policies to encourage water conservation in the industrial sector. Increasing water prices would reduce water use substantially.WaterConservation,Environmental Economics&Policies,Decentralization,Water and Industry,Economic Theory&Research,Water and Industry,Water Supply and Sanitation Governance and Institutions,Town Water Supply and Sanitation,Environmental Economics&Policies,Water Conservation

What are public services worth, and to whom ? Non-parametric estimation of capitalization in Pune

The availability and quality of basic public services are important determinants of urban quality of life. In many cities, rapid population growth and fiscal constraints are limiting the extent to which urban governments can keep up with increasing demand for these services. It therefore becomes important to prioritize provision of those services to best reflect local demand. The authors present a strategy to estimate the demand for public services, which is sensitive to heterogeneity in preferences across types of households, and the nonparametric estimation addresses problems arising from functional form restrictions. Using data from Pune, India, they estimate the demand for public services, as represented by the marginal change in the self-assessed monthly rental price of dwellings from the services. The authors find that the value of publicly provided services accruing to the poor is greater than that going to wealthier households, and even untargeted across-the-board investment in specific services can be progressive.Housing&Human Habitats,Public Sector Economics&Finance,Municipal Financial Management,Economic Theory&Research,Public Sector Management and Reform

Assessing benefits of slum upgrading programs in second-best settings

Slum upgrading programs are being used by national and city governments in many countries to improve the welfare of households living in slum and squatter settlements. These programs typically include a combination of improvements in neighborhood infrastructure, land tenure, and building quality. In this paper, the authors develop a dynamic general equilibrium model to compare the effectiveness of alternative slum upgrading instruments in a second-best setting with distortions in the land and credit markets. They numerically test the model using data from three Brazilian cities and find that the performance of in situ slum upgrading depends on the severity of land and credit market distortions and how complementary policy initiatives are being implemented to correct for these problems. Pre-existing land supply and credit market distortions reduce the benefit-cost ratios across interventions, and change the rank ordering of preferred interventions. In the light of these findings, it appears that partial equilibrium analysis used in typical cost-benefit work overstates the stream of net benefits from upgrading interventions and may in fact propose a misleading sequence of interventions.Banks&Banking Reform,Urban Housing,Urban Slums Upgrading,Urban Services to the Poor,Economic Theory&Research

Fiscal and distributional implications of property tax reforms in Indian cities.

The property tax is an important local revenue source in many countries, but it is often underused as a source for financing local expenditures. In India, many local governments have initiated administrative and valuation reforms to increase the yield from property taxes. In this paper, we examine the fiscal and distributional implication of the ongoing and potential assessment reforms in two Indian cities - Bangalore and Pune. While our findings are specific to these two cases, the reform efforts and underlying problems are epresentative of most urban local governments. Our main finding is that reform efforts that bring assessment of the property tax base closer to market values have significant positive impacts on revenue generation, and do not have adverse consequences in terms of the tax burden faced by the poor. Further, regulations such as rent control significantly impinge on the growth of revenues from the property tax and in fact do not serve the interests of the poor. While current assessment reforms are a good first step towards increasing the performance of the property tax, structural issues such as improved valuation, increasing buoyancy of the tax, and building taxpayer confidence need to be addressed to make these reforms sustainable.Property tax

Economic geography : real or hype?

Economic geography has become a mantra for many economists, geographers, and regional scientists. Previous studies have tested the importance of economic geography for production activities and found a significant association between them. Most of these studies, however, have not taken into account that economic geography influences location decisions at the firm level. The authors show a potential bias that can arise when firm location choices are not considered in estimating the contribution of economic geography to industry performance. Their analysis using microdata of Indian manufacturingfirms shows there is an upward bias in the contribution of economic geography to productivity when firm location choices are not considered in the analysis.Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Water and Industry,Labor Policies,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Water and Industry,National Urban Development Policies&Strategies

Are you satisfied? citizen feedback and delivery of urban services

Citizen feedback is considered an effective means for improving the performance of public utilities. But how well does such information reflect the actual quality of service delivery? Do so-called scorecards or report cards measure public service delivery accurately, or do personal and community characteristics have a significant impact on residents'assessment of service quality? Deichmann and Lall investigate these questions using newly available household survey data on access to and satisfaction with selected public services in two Indian cities-Bangalore and Jaipur. They develop a framework where actual levels of services received, as well as expectations about service performance, influence a household's satisfaction with service delivery. The authors find that satisfaction increases with improvements in the household's own service status, a finding that supports the use of scorecard initiatives. But the results also suggest that a household's satisfaction is influenced by how service quality compares with that of its neighbors or peers and by household level characteristics such as welfare and tenure status. This implies that responses in satisfaction surveys are at least in part determined by factors that are unrelated to the service performance experienced by the household.Health Economics&Finance,Environmental Economics&Policies,Enterprise Development&Reform,Decentralization,Water and Industry,Water Supply and Sanitation Governance and Institutions,Environmental Economics&Policies,Town Water Supply and Sanitation,Governance Indicators,Health Economics&Finance

"Learning by dining": informal networks and productivity in Mexican industry

The authors analyze the determinants of firm productivity in a group of Mexican firms. In particular, they test the contribution of external factors such as trade and knowledge diffusion, the availability of infrastructure, informal knowledge exchange, competitive environment, and business regulatory climate. The authors find that one factor consistently emerges as an important proximate source of productivity-access to informal networks. Interaction in the form of"business lunches"with local buyers and suppliers, competitors, government officials, and other professionals have a significant and positive effect on a firm's productivity. Access to regulators and agents of backward and forward linkages are important in settings where information on business practices and regulations is not publicly disclosed. The results complement predictions of traditional growth theory-in addition to technology and learning being the driving force of firm productivity, proximity to influential individuals who can grant favors or provide information advantage on business and trade practices have significant productivity impacts.Economic Theory&Research,Labor Policies,Banks&Banking Reform,Environmental Economics&Policies,Decentralization,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Municipal Financial Management,ICT Policy and Strategies

Industrial Location and Spatial Inequality: Theory and Evidence from India

income inequality, economic geography, industrial location, India

Business environment, clustering, and industry location : evidence from Indian cities

How do differences in the local business environment influence location of industry within countries? How do the benefits of a good business environment compare with those from good market access and agglomeration economies from industry clustering? The authors examine these questions by analyzing location decisions of individual firms. Using data from a recently completed survey of manufacturing firms in India, they find that both the local business environment and agglomeration economies significantly influence business location choices across cities. In particular, excessive regulation of labor and of other industrial activities reduces the probability of a business locating in a city. The authors'findings imply that in order to attract industrial activity, smaller or remoter cities need to offer even more attractive policy concessions or reforms to offset the effects of their relatively adverse (economic) geography. Their methodology pays special attention to the identification of agglomeration economies in the presence of unobserved sources of natural advantage.

Density and disasters: economics of urban hazard risk

Today, 370 million people live in cities in earthquake prone areas and 310 million in cities with high probability of tropical cyclones. By 2050, these numbers are likely to more than double. Mortality risk therefore is highly concentrated in many of the world’s cities and economic risk even more so. This paper discusses what sets hazard risk in urban areas apart, provides estimates of valuation of hazard risk, and discusses implications for individual mitigation and public policy. The main conclusions are that urban agglomeration economies change the cost-benefit calculation of hazard mitigation, that good hazard management is first and foremost good general urban management, and that the public sector must perform better in generating and disseminating credible information on hazard risk in cities.Banks&Banking Reform,Environmental Economics&Policies,Hazard Risk Management,Urban Housing,Labor Policies