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The Buck Stops Where? Federalism, Uncertainty, and Investment in the Brazilian Water and Sanitation Sector

Evan Kresch ()

American Economic Journal: Economic Policy, 2020, vol. 12, issue 3, 374-401

Abstract: This paper documents how regulatory uncertainty may undermine public service when different levels of government share a mandate on public service provision. I examine the Brazilian water and sanitation sector, which presents a natural experiment of shared provision between state and municipal companies. Using a difference-in-differences framework, I study a legal reform that clarified the relationship between municipal and state providers and eliminated any takeover threat by state companies. I find that after the reform, municipal companies almost doubled their total system investment, leading to significant increases in system access and decreases in child mortality.

JEL-codes: H77 L95 O13 O18 Q53 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1257/pol.20180327

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Handle: RePEc:aea:aejpol:v:12:y:2020:i:3:p:374-401