Expert panel discussion: Public finance and urban growth

The Public Finance and Urban Growth session was chaired by Tim Besley (LSE, IGC) and and opened with David Albouy’s (University of Illinois) presentation of “Are Cities Ever Too Small”, which addressed the topic of optimal city size and revenue redistribution schemes. Albouy’s theoretical model considers the planning incentives at the city, federal, political, and competitive level, identifying the optimal size of cities, considering variances in positive and negative externalities across and within cities. Policy ideas that emerged for debate were the role of government in actively coordinating movement to minor cities and the possibility of subsidising agglomeration, balanced by a congestion tax.

Adnan Khan (LSE, IGC) followed, discussing “Evidence of Property Tax Collection in Pakistan”, during which he reviewed past and ongoing research to assess incentives among revenue agents. These projects sought ways to work around the political constraints that affect property tax collection, the incidence of corruption, and tax morale. One key point he emphasised was the political norm of government accountability for public service provision facilitated via the implementation of property taxation.

Then Mihaly Kopanyi (World Bank) reviewed the experience of Property Tax Reform in Rwanda, highlighting Kigali’s narrow property tax base, free rider problems, and short-sightedness in system design. Kopanyi’s recommendations included the ex-ante consideration of alternative tax systems, simulation of potential impacts, and analysis of institutional and implementation capacity. Examining these factors ex-post for Rwanda showed a three-fold increase in Kigali’s estimated tax-take and for Kopanyi to recommend the revision of the property tax legislation.

The session concluded with Meembo Changula (Ministry of Local Government and Housing, Zambia) who presented “The Case for National Urban Policy”, who outlined the historic and expected development of cities in Zambia. This economy has seen urban concentration along its mineral and rail corridors and is one of the fastest urbanising populations in Africa. Zambia is working to identify and formulate a cohesive National Urban Policy (NUP), which will be implemented as the country simultaneously plans and undertakes reforms to decentralise fiscal and revenue activities.

By ANNE LASKI, Country Economist, IGC Tanzania