Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era

John Joseph Wallis and Barry Weingast ()

No 11397, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Why did states dominate investments in economic development in early America? Between 1787 and 1860, the national government's $54 million on promoting transportation infrastructure while the states spent $450 million. Using models of legislative choice, we show that Congress could not finance projects that provided benefits to a minority of districts while spreading the taxes over all. Although states faced the same political problems, they used benefit taxation schemes -- for example, by assessing property taxes on the basis of the expected increase in value due to an infrastructure investment. The U.S. Constitution prohibited the federal government from using benefit taxation. Moreover, the federal government's expenditures were concentrated in collections small projects -- such as lighthouses and rivers and harbors -- that spent money in all districts. Federal inaction was the result of the equilibrium political forces in Congress, and hence an equilibrium impotence.

JEL-codes: H1 N0 N4 N7 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-pbe and nep-pol
Note: DAE PE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.nber.org/papers/w11397.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:11397

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11397

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().