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

Alison F. DelRossi and Robert P. Inman
Authors registered in the RePEc Author Service: Alison F Del Rossi ()

No 6440, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: H4 (search for similar items in EconPapers)
Date: 1998-03
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Journal of Public Economics (1999).

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Journal Article: Changing the price of pork: the impact of local cost sharing on legislators' demands for distributive public goods (1999)
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