Changing the Price of Pork: the Impact of Local Cost Sharing on Legislators\u27 Demands for Distributive Public Goods

The provision of public services through national legislatures gives legislators the chance to fund locally beneficial public projects using a shared national tax base. Nationally financed and provided local (congestible) public goods will be purchased at a subsidized price below marginal cost and may be inefficiently too large as a consequence. An important assumption behind this inefficiency is that national legislators in fact demand more of the locally beneficial project as the local price for projects declines. This paper provides the first direct test of this important assumption using legislators\u27 project choices following the passage of the Water Resources Development Act of 1986 (WRDA\u2786). We find legislators\u27 chosen water project sizes do fall as the local cost share rises, with a price elasticity of demand ranging from −0.81 for flood control and shoreline protection projects to −2.55 for large navigation projects. The requirement of WRDA\u2786 that local taxpayers contribute a greater share to the funding of local water projects reduced overall proposed project spending in our sample by 35% and the federal outlay for proposed project spending by 48%

Changing the Price of Pork: The Impact of Local Cost Sharing on Legislators' Demand for Distributive Public Goods

The provision of public services through national legislatures gives legislators the chance to fund locally-beneficial public projects using a shared national tax base. Nationally-financed, local public goods will be purchased at a subsidized price below marginal cost and may be inefficiently too large as a consequence. An important assumption behind this conclusion is that national legislators in fact demand more of the locally-beneficial project as the local price for projects declines. This paper provides the first direct test of this important assumption using legislators' project choices following the passage of the Water Resources Development Act of 1986 (WRDA'86). We find legislators' chosen water project sizes do fall as the local cost share rises, with a price elasticity of demand ranging from -1.3 for flood control and shoreline protection projects to perhaps as high as -2.5 for large navigation projects. The requirement of WRDA'86 that local taxpayers contribute a greater share to the funding of local water projects reduced overall project spending in our sample by 35 percent and the federal outlay for project spending by 48 percent.

On the Relationship between Mobility, Population Growth, and Capital Spending in the United States

In this paper, we assess the empirical relationship between population growth, mobility, and state-level capital spending in the United States. To evaluate the magnitude of the coefficients, we introduce an explicit, quantitative political-economy model of government spending determination, where mobility and population growth generate departures from Ricardian equivalence. Our estimates find strong responses in the level of capital provision per capita to these demographic movements; in fact, the resulting coefficients are stronger than the model delivers. Regression coefficients on population growth and mobility also yield opposite implications for the direction to which spending is distorted by the politicaleconomy friction, posing a further challenge