All rights reserved 1 2 3 4 12 11 10 09 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. substantive and editorial suggestions regarding the paper. We also thank participants and their comments in the World Bank seminar on September 10, 2009, where the findings of the report was discussed, particularly by the two formal discussants: Sumter Lee Travers, Manager of Subnational Finance Group of the World Bank Group; and Christine Kessides, Lead Economist of the Urban, Water and Sanitation Department of the Europe and Central Asia Region of the World Bank. Valuable contributions were made by our colleagues in four countries who provided critical input in assembling the data on Indonesia, Kyrgyzstan, Serbia, and the UK.

Cities are the engines that drive national economic growth. By clustering complementary economic activities, intellectual and financial capital, and entrepreneurial energy, they raise labour productivity and create the potential for sustainable growth through urbanization as low-productivity rural labourers move to the cities. The backbone of a well-functioning city is its urban infrastructure-the network of roads, distribution of electricity, water supply and waste removal-which allows residents and firms to work productively under high-density conditions. We in India have come to appreciate the critical nature of urban infrastructure. The floods in Mumbai reminded us that even as we frame fundamental economic reforms, the biggest gap in India's infrastructure remains urban infrastructure. The whole world envies the congregation of brilliant, entrepreneurial people in Bangalore, but the city is dying a slow death owing to a congested and dysfunctional infrastructural system. This growing 'urban infrastructure deficit' needs to be corrected as quickly as possible, because growing cities are India's future. From one perspective, the urban infrastructure challenge is a challenge for public finance; in a federal system, it's a challenge also for intergovernmental finance. As this volume makes clear, large sums will be required in all countries to invest adequately in urban infrastructure and to operate and maintain systems once they are built. For some advocates of fiscal federalism, the only solution lies in transferring greater revenue-raising powers to local governments. However, what are needed are reliable revenue streams that can be dedicated to infrastructure support. Much of the financing for electricity distribution, water supply, sanitation and waste removal can

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The authors of this study use data from the January 1984 Current Population Survey to examine the impact of local labor market conditions on the financial losses of displaced manufacturing workers. They find that strong overall growth in the local economy reduced the economic losses of white-collar workers whose industry of displacement was declining, but not of blue-collar workers in the same situation. Most older, poorly educated blue-collar workers with long tenure at their pre-layoff job suffered large financial losses even when displaced in a growing local economy. All workers, including those who were young and well-educated, suffered large financial losses when located in a depressed local economy.

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.