Yeti N. Madhoo

Policy and nonpolicy determinants of progressivity of block residential water rates – a case study of Mauritius

This article presents empirical results on increasing block water rates that contradict conventional wisdom in developing countries and many developed countries. Unlike in other countries, family size in Mauritius increases with income. Due to this unusual demographic dimension, increasing block tariffs coupled with lifeline rates that are below long-run marginal cost applicable to low-volume users produce a different result. Regional variations in water demand and extensive metering both in rural and urban areas reinforce the redistributing nature of water charges. Traditional incidence analysis with adjustment for family size, linear expenditure systems approach and interactive demand models empirically support this result.

International Trends in Water Utility Regimes

This paper provides the taxonomy of country experiences in managing their water utilities. Institutions for water supply for various uses and their financial implications are analysed. Different episodes of governmental intervention in water supply and charging are examined. From the survey of different regimes and the existing literature, cost recovery and affordability emerge as the major building blocks for any reform of water utilities. Privatization of water services in terms of ownership change, public-private arrangements and international involvement seems to be a mixed blessing and donor assistance to water projects raises issues in international inequality and does not increase cost recovery levels. Cost recovery is positively associated with economic development, institutional quality and performance of water utilities. Copyright 2007 The Authors Journal compilation

Beneficiary charges: The Cinderella of subnational finance

The revenue objective to cover the identifiable costs (in full or partly) is important with respect to both fees and charges. All revenue sources -- taxes, fees, fines and user charges -- are instruments of cost recovery to meet the financial obligations of public administration and the public and private supply of public goods and services. In the case of publicly supplied local goods, such as public administration, public education, health services, street lighting and sanitation, cost recovery may not be the dominant objective. But cost recovery is tremendously significant in the case of privately supplied local public goods, such as water supply, sewerage, electricity and telephone. In recent years, user fees and charges have gained significance at the sub-national level mainly because of hard local budget constraints. Recession resulted in drastic cuts in intergovernmental transfers and reduced access to market loans. According to the 2009 International City and County Management (ICMA) State Survey in the US, for instance, 46 percent of reporting local governments increased existing fees by 23 percent and added new levies for additional funds (Ebel and Petersen, 2012). While these trends are encouraging, there is no systematic research to assess the efficacy of local government in collecting fees and user charges vis-a-vis performance of other institutional arrangements such as off- budget supply and privatization. The structure of this paper is as follows. Section 2 discusses the principles and practices of user fees and charges and their revenue potential. Section 3 analyzes factors adversely impacting the growth of beneficiary charges in local government budgets, including the centralization of revenue, intergovernmental fiscal transfers, and alternative fiscal strategies such as tax earmarking and piggybacking. Section 4 examines the trade-off between budgetary and privatization regimes of water supply and the efficacy of cost recovery policies. Section 5 examines the implications of water utility policies for full and partial cost recovery vis-a-vis the marginal cost of public funds. This section also includes an analysis of the impact of willingness to pay for water on the marginal cost of public funds. An empirical analysis is carried out using the results of a contingent valuation survey in Mauritius and estimating an empirical model for measuring the welfare effects of water charges in terms of the willingness to pay and the cost of providing water. When willingness to pay exceeds the average cost of supplying water, the marginal cost of public funds is reduced, thus increasing the revenue potential of water charges. The last section concludes with policy implications.

Political Economy of Environmental Regulation and Performance: Some Empirical Results from SIDS☆

Abstract This paper empirically examines environmental regulation politics in terms of proactive lobbying at different levels of public environmental management, namely enacting legislation and implementing policies. In the proposed models, effectiveness of environmental regulation is captured by (i) level of stringency of environmental regulations, (ii) degree of enforcement, and (iii) the achievement of various environmental performance goals. Findings from cross-country regressions support the capture theory where small size and greater availability of resources render industrial groups in SIDS powerful at the legislation level. Rent-seeking behaviour of industrial lobbies appears to be channeled via corrupt practices but is constrained by high dependence of SIDS on international trade as well as improved governance measures and better rule of law. No evidence is obtained on environmental legislative damage caused by agricultural lobbies and tourism sector. At the implementation level, both industry and agriculture are found to be pro-active in terms of non- compliance to environmental legislations causing significant damage to the environment. Weak agricultural lobbies at legislative level in SIDS may be due to extensive government support programs to agriculture, which would serve to dampen or nullify any increment in cost borne by farmers arising from stringent environmental regulations. The impact of tourism lobbies on environmental performance is inconclusive. Tourism lobbies in SIDS have interest in maintaining some level of environmental quality and do not display severe adverse impacts at the implementation phase even after controlling for their interaction with institutional variables (corruption, rule of law and government effectiveness).

GEOGRAPHY, MACROECONOMIC VULNERABILITY AND ECONOMIC PERFORMANCE

The objective of the paper is to empirically examine the effects of macroeconomic volatility on growth and other indicators of welfare incorporating more particularly geography produced diverse conditions that are either growth promoting or growth hampering. We extend the literature on macroeconomic volatility, growth and welfare by integrating the macroeconomics and new development economics literature on cross-country growth performance by capturing factors beyond neoclassical and new growth approaches. Empirical results confirm that growth outcomes under different geography-produced favorable and adverse conditions have the potential of minimizing and exacerbating the effects of macroeconomic variability. The significance of geography and its links with institutions is highlighted and adverse growth and welfare effects of income inequality, coastal openness and trade openness are analyzed.

Fish imports as an environmental policy

Although Total Allowable Catch (TAC) system has not been successful in management of fisheries, fish imports have shown features of an environmental-friendly policy. Imports emerge as a significant tool to improve fish productivity through biodiversity conservation and induce the use of less capital intensive technology. Conversely, TAC system harms biodiversity leading to increased capital effort and reduced catch levels. Another interesting finding is the existence of an Environmental Kuznets Curve (EKC)-type relationship between per capita Gross Domestic Product (GDP) and fish catch. As development proceeds, propensity to import increases, having favourable impact on biodiversity through reduced fish production.