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Water, Water Everywhere. Municipal Finance and Water Supply in American Cities

In: Corruption and Reform: Lessons from America's Economic History

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  • David M. Cutler
  • Grant Miller

Abstract

The construction of municipal water systems was a major event in the history of American cities -- bringing relief from disease, providing resources to combat fires, attracting business investment, and promoting development generally. Although the first large-scale municipal water system in the United States was completed in 1801, many American cities lacked waterworks until the turn of the twentieth century. This paper investigates the reason for the century-long delay and the subsequent frenzy of waterworks construction from 1890 through the 1920s. We propose an explanation that emphasizes the development of local public finance. Specifically, we highlight the importance of municipal bond market growth as a facilitator of debt finance. We argue that this explanation is superior to others put forward in the literature, including disease knowledge, the presence of externalities, municipal population density, natural monopoly, contracting difficulties, corruption costs, and growth in the supply of civil engineers.

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This chapter was published in:

  • Edward L. Glaeser & Claudia Goldin, 2006. "Corruption and Reform: Lessons from America's Economic History," NBER Books, National Bureau of Economic Research, Inc, number glae06-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9982.

    Handle: RePEc:nbr:nberch:9982

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    1. Michael D. Bordo & Anna J. Schwartz, 1997. "Monetary Policy Regimes and Economic Performance: The Historical Record," NBER Working Papers 6201, National Bureau of Economic Research, Inc.
    2. David M. Cutler & Grant Miller, 2004. "The Role of Public Health Improvements in Health Advances: The 20th Century United States," NBER Working Papers 10511, National Bureau of Economic Research, Inc.
    3. Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(1), pages 38-92, February.
    4. Sukkoo Kim, 2002. "The Reconstruction of the American Urban Landscape in the Twentieth Century," NBER Working Papers 8857, National Bureau of Economic Research, Inc.
    5. Michael D. Bordo & William G. Dewald, 2001. "Bond Market Inflation Expectations in Industrial Countries: Historical Comparisons," NBER Working Papers 8582, National Bureau of Economic Research, Inc.
    6. Rebecca Menes, 2003. "Corruption in Cities: Graft and Politics in American Cities at the Turn of the Twentieth Century," NBER Working Papers 9990, National Bureau of Economic Research, Inc.
    7. Claudia Goldin & Lawrence F. Katz, 1998. "The Shaping of Higher Education: The Formative Years in the United States, 1890 to 1940," NBER Working Papers 6537, National Bureau of Economic Research, Inc.
    8. Scott E. Masten, 2011. "Public Utility Ownership in 19th-Century America: The "Aberrant" Case of Water," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 27(3), pages 604-654.
    9. Arthur Grinath, III & John Joseph Wallis & Richard Sylla, 1997. "Debt, Default, and Revenue Structure: The American State Debt Crisis in the Early 1840s," NBER Historical Working Papers, National Bureau of Economic Research, Inc 0097, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Cain, Louis & Hong, Sok Chul, 2009. "Survival in 19th century cities: The larger the city, the smaller your chances," Explorations in Economic History, Elsevier, Elsevier, vol. 46(4), pages 450-463, October.
    2. Matthew Gandy, 2006. "Water, Sanitation and the Modern City: Colonial and Post-colonial Experiences in Lagos and Mumbai," Human Development Occasional Papers (1992-2007), Human Development Report Office (HDRO), United Nations Development Programme (UNDP) HDOCPA-2006-06, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    3. Yusuf, Shahid & Nabeshima, Kaoru & Wei Ha, 2007. "What makes cities healthy ?," Policy Research Working Paper Series 4107, The World Bank.

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