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

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  • Rauch, James E

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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Suggested Citation

  • Rauch, James E, 1995. "Bureaucracy, Infrastructure, and Economic Growth: Evidence from U.S. Cities during the Progressive Era," American Economic Review, American Economic Association, vol. 85(4), pages 968-979, September.
  • Handle: RePEc:aea:aecrev:v:85:y:1995:i:4:p:968-79
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    References listed on IDEAS

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    1. De Long, J Bradford & Shleifer, Andrei, 1993. "Princes and Merchants: European City Growth before the Industrial Revolution," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 671-702, October.
    2. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    3. 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.
    4. 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, pages 95-140.
    5. James E. Rauch, 1993. "Does History Matter Only When It Matters Little? The Case of City-Industry Location," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 843-867.
    6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
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    More about this item

    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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