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Municipalizing American Waterworks, 1897--1915

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  • Werner Troesken

Abstract

We consider three explanations for public ownership: public interest, regulation, and a transaction cost interpretation. We employ a large dataset containing information on the municipal acquisition of U.S. private water companies between 1897 and 1915. Those data allow us to isolate the effects of high water rates, water quality, financial difficulties, extensiveness of distribution system, and the like in determining the probability of subsequent municipal takeover of companies that were private in 1897. After controlling for such factors, we find evidence consistent with a transaction cost interpretation of municipal acquisition. We find relatively little support for regulation-based or public interest interpretations. Our evidence indicates that municipalities were unable to credibly precommit to not expropriating value from private water companies once investments were made, resulting in a rational reduction in investment in water provision by private companies. Local governments, in turn, used this rational underinvestment as a pretext for municipalizing private water companies. Copyright 2003, Oxford University Press.

Suggested Citation

  • Werner Troesken, 2003. "Municipalizing American Waterworks, 1897--1915," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 373-400, October.
  • Handle: RePEc:oup:jleorg:v:19:y:2003:i:2:p:373-400
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    Cited by:

    1. Spiller, Pablo T., 2013. "Transaction cost regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 232-242.
    2. Kitchens, Carl T. & Jaworski, Taylor, 2017. "Ownership and the price of residential electricity: Evidence from the United States, 1935–1940," Explorations in Economic History, Elsevier, vol. 64(C), pages 53-61.
    3. Beecher, Janice A. & Kalmbach, Jason A., 2013. "Structure, regulation, and pricing of water in the United States: A study of the Great Lakes region," Utilities Policy, Elsevier, vol. 24(C), pages 32-47.
    4. Felix Höffler & Achim Wambach, 2013. "Investment coordination in network industries: the case of electricity grid and electricity generation," Journal of Regulatory Economics, Springer, vol. 44(3), pages 287-307, December.
    5. Howard Bodenhorn, 2017. "Finance and Growth: Household Savings, Public Investment, and Public Health in Late Nineteenth-Century New Jersey," NBER Working Papers 23430, National Bureau of Economic Research, Inc.
    6. Brian Beach & Werner Troesken & Nicola Tynan, 2016. "Who Should Own and Control Urban Water Systems? Historical Evidence from England and Wales," NBER Working Papers 22553, National Bureau of Economic Research, Inc.
    7. Edward L. Glaeser, 2012. "Urban Public Finance," NBER Working Papers 18244, National Bureau of Economic Research, Inc.
    8. Matthew Gandy, 2006. "Water, Sanitation and the Modern City: Colonial and Post-colonial Experiences in Lagos and Mumbai," Human Development Occasional Papers (1992-2007) HDOCPA-2006-06, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    9. Lauren Hoehn Velasco, 2016. "Explaining Declines in US Rural Mortality, 1910-1933: The Role of County Health Departments," Boston College Working Papers in Economics 919, Boston College Department of Economics.
    10. repec:eee:juipol:v:48:y:2017:i:c:p:210-218 is not listed on IDEAS

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