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Bureaucracy, Infrastructure, and Economic Growth: Evidence from U.S. Cities During the Progressive Era

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James E. Rauch

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Abstract

Recent work in the sociology of economic development has emphasized the establishment of a professional bureaucracy in place of political appointees as an important component of the institutional environment in which private enterprise can flourish. I hypothesize that establishment of such a bureaucracy will lengthen the period that public decision makers are willing to wait to realize the benefits of expenditures, leading to allocation of a greater proportion of government resources to long-gestation period projects such as infrastructure. This hypothesis can be tested using data generated by a `natural experiment' in the early part of this century, when a wave of municipal reform transformed the governments of many U.S. cities. Controlling for city and time effects, adoption of Civil Service is found to increase the share of total municipal expenditure allocated to road and sewer investment. Other estimates imply that this increased share raises the growth rate of city manufacturing employment by one-half percent per year.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4973.

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Date of creation: Dec 1994
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Publication status: published as American Economic Review, Vol. 85 (September 1995): 968-979.
Handle: RePEc:nbr:nberwo:4973

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Find related papers by JEL classification:
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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  1. James E. Rauch, 1994. "Bureaucracy, Infrastructure, and Economic Growth: Theory and Evidence from U.S. Cities During the Progressive Era," University of California at San Diego, Economics Working Paper Series 94-06, Department of Economics, UC San Diego.
  2. Cukierman, Alex & Kalaitzidakis, Pantelis & Summers, Lawrence H. & Webb, Steven B., 1993. "Central bank independence, growth, investment, and real rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39, pages 95-140, December. [Downloadable!] (restricted)
  3. James E. Rauch, 1993. "Does History Matter Only When it Matters Little? The Case of City-Indu try Location," NBER Working Papers 4312, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. De Long, J Bradford & Shleifer, Andrei, 1993. "Princes and Merchants: European City Growth before the Industrial Revolution," Journal of Law & Economics, University of Chicago Press, vol. 36(2), pages 671-702, October.
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  5. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  7. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April. [Downloadable!] (restricted)
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  8. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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