A variety of means are currently used throughout the world to finance urban infrastructure in new areas and many countries have attempted to apply alternative and innovative methods to address this issue. Since 1985, Iran has employed a direct user-pays system to finance urban infrastructure in new areas. Questions surrounding effectiveness and equity in the user-pays system result in some conflicting issues. This paper examines the implications of the user-pays system in terms of effectiveness and equity considerations, using the experience of Iran. The primary foci are: first, to expand the discussion on financial aspects of infrastructure provision; and, secondly, to understand and explain the implications of the user-pays system for infrastructure provision, based on an empirical analysis.
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