During the 1980's, governments in both Britain and the U.S. were increasingly inclined to shift costs and obligations onto developers. In the U.S., a variety of methods were experimented with, but the predominant technique which emerged was to impose mandatory, fixed exactions and "impact fees." In Britain, local authorities negotiated legal agreements which frequently involved "contributions." This thesis evaluates the negotiation of agreements in Britain in light of contrasting U.S. experience with developer finance. The thesis begins by setting developer finance in historical context, describing how and why different methods of developer finance emerged in the two countries. Planning research and literature in Britain and the U.S. are analysed and compared to identify important research questions regarding the attitudes of planners and developers, the rationale for obtaining developer payments, the process for obtaining payments, factors affecting local government success in extracting payments, the incidence of developer payments, and the presumed effects of developer finance on planning and development control. The core of the thesis describes empirical research conducted in England, analysing how local authorities in a high-growth region used agreements between 1985 and 1990. An important feature of the research is that it examines local authority use of agreements in a specific geographic and planning context. This research calls into question many widely held assumptions about how planning agreements have been used, and suggests that, in the British context, negotiated agreements have significant planning advantages. The thesis argues that an important criteria for evaluating developer finance is how it functions in relation to regional planning and growth management objectives, and that additional geographically-based research is needed in both countries to evaluate the effects of developer finance on patterns of development, and on the achievement of planning policies.

In this thesis, we test the effect of intergovernmental grants on municipal spending in Turkey. In our analysis, we incorporate Turkey's institutional features in modelling local authority behaviour. We give evidence on the results of incorporating dynamic elements into the expenditure equation in order to explain the variation in municipal expenditure. Our findings also throw light on the existence of the flypaper effect in the dynamic estimation. In our analysis, by using the method of the error correction mechanism (ECM), we also measure how quickly local government expenditure adjusts to its long-run growth path following a disturbance. We find that the past year's expenditure has a significant impact on current local expenditure. Our result in this respect contributes to the existing literature which seems to ignore the significant impact of previous expenditure on current local expenditure while estimating the demand for (or determinant of) local expenditure. While identifying avenues for further theoretical and empirical research in the flypaper effect, Bailey and Connolly (1998) suggested that one of the most obvious avenues is the inclusion of dynamic elements into the exclusively static approach. This is in order to take account of time lags in adjusting the supply of local government services to the current demand conditions. An important contribution of this thesis is to satisfy Bailey and Connoly (1998)'s request by including the lagged municipal expenditure as an explanatory variable. We also analyse the grant allocation in Turkey. We test empirically whether central government transfers to the municipalities are made on the basis of economic criteria, or in accordance with the political interest of politicians, and hence the coalition government. We find that equity and efficiency considerations do not appear to motivate the politicians, but neither is grant allocation apparently motivated by the desire to secure re-election.

This dissertation explores the effect of intergovernmental fiscal transfers on the fiscal operations of the federating units in Pakistan. It is the first attempt to carry out disaggregated analysis of the fiscal behavior of each of the four provinces of Pakistan, separately and jointly in response to various types and categories of federal transfers, grants and borrowings. Thus it is a noteworthy addition in the empirical literature in the context of a less developed and resource constraints country where the sensitivities are always attached in the determination of distributional criteria and allocation of transfers among federating units. The study explores whether federal transfers to provinces have been utilized for stimulating provincial public expenditures or have largely been substituted for fiscal efforts to collect taxes from provincial own resources. The study also investigates the impact of unconditional and conditional transfers to determine the varying effects on public spending. Moreover, the phenomenon of “Flypaper Effect” which hypothesizes that the federal transfers and the provincial gross domestic product (resident income) have similar accelerating or multiplier effect on provincial expenditures is also examined. In addition, it is also attempted to scrutinize the role of federal transfers in the process of fiscal equalization among provinces as regards to the provision of public services. The government expenditure method is applied to determine the quantity of public service provision. To estimate the provincial fiscal response to federal transfers, total provincial expenditure is modeled as a function of provincial gross domestic product at factor cost, several types of transfers and total borrowings. Various macro, fiscal and demographic variables are also used in the estimation process to remove simultaneity in grants and provincial expenditures and also to control for diverse socioeconomic characteristics of federating units. All variables are adjusted with the respective provincial population and measured in constant prices. The expenditure functions are estimated by using Ordinary Least Square and Two Stage Least Square estimation techniques through E-VIEWS software covering the period between 1973 and 2009. Various specifications of expenditure function are used in this study for testing different hypothesis. The empirical results establish the importance of our thesis as estimated fiscal behavior of individual provinces show significantly varied responses. The findings of the study clearly highlight that aggregate or joint provincial fiscal response is more similar to the behavior of two relatively developed Punjab and Sindh provinces. The direction, marginal effects and the level of significance of coefficients measuring fiscal response to federal transfers for these two provinces is significantly different as compared with the other two underdeveloped Khyber Pakhtunkhwa and Baluchistan provinces. Thus, any attempts to draw conclusions regarding provincial response to federal transfers based on combined data may mislead mainly due the diverse socio and demographic characteristics and also because of the varied levels of economic development of federating units. Therefore, to design transfer strategies in Pakistan disaggregate analysis of provincial fiscal behavior is imperative. It is affirmed that the conditional grant have a larger and more elastic effect on provincial expenditure compared to unconditional grants. Therefore conscious effort is needed to design appropriate transfer strategies by attaching conditionality to its spending. The findings also suggest that unconditional transfers are heavily utilized for substitution of effort to raise revenue from own resources. Hence for rewarding improved provincial fiscal effort, some premium may be attached on the achievement of certain level of social services. This reward should be in the form of close ended matching grant to avoid its likely misuse. Similarly conditional matching incentives may also be given for goods of high federal priority but attracts lower provincial investment. Conditional grants though compromise the objective of provincial expenditure autonomy but nevertheless these greatly enhance the multiplier effect of fund transferred. The significant and much higher provincial dependence on federal transfers are found in Pakistan. It is therefore vital that provinces may have access to some buoyant sources of revenue to finance adequately their fiscal needs. Alternatively provinces may be also allowed piggybacking on personal income tax, wealth tax or single stage sales tax as practiced in number of countries. The unconditional transfers however may be continued for meeting fixed cost of running provincial governments without compromising on the provincial priorities. The analysis will facilitate development practitioners, policy makers and planners in designing appropriate criteria and allocation strategies for future fiscal framework of federal transfers.

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