Inefficiencies in Local Infrastructure: Evidence from Drinking Water in California

Pierre Bodere, Giulia Brancaccio and Karam Kang

No 35690, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Local elected officials oversee critical infrastructure, often with limited electoral accountability. This paper studies how this distorts investment across California drinking-water systems. We document that pollution responds to shifts in the political environment, motivating a dynamic model of public investment. We measure welfare returns to investment directly, combining event-study estimates of investment effectiveness and costs with those of residents’ clean-water valuations, recovered from housing choices. Investment choices identify policymakers’ responsiveness to those returns. Weak accountability diverts investment from high-return systems and conventional policies imperfectly offset these distortions: subsidy takeup is misaligned with returns, while uniform mandates induce welfare losses.

JEL-codes: D72 H41 H54 L0 L95 Q53 R31 (search for similar items in EconPapers)
Date: 2026-08
Note: EEE IO PE
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