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Public Ownership in the American City

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  • Edward L. Glaeser

Abstract

American local governments own and manage a wide portfolio of enterprises, including gas and electricity companies, water systems, subways, bus systems and schools. Existing theories of public ownership, including the presence of natural monopolies, can explain much of the observed municipal ownership. However, the history of America’s cities suggests that support for public ownership came from corruption then associated with private ownership of utilities and public transportation. Private firms that either buy or sell to the government will have a strong incentive to bribe government officials to get lower input prices or higher output prices. Because municipal ownership dulls the incentives of the manager and decreases the firm’s available cash, public firms may lead to less corruption. Public ownership is also predicted to create inefficiency and excessively large government payrolls.

Suggested Citation

  • Edward L. Glaeser, 2001. "Public Ownership in the American City," Harvard Institute of Economic Research Working Papers 1930, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:1930
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    File URL: http://www.economics.harvard.edu/pub/hier/2001/HIER1930.pdf
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    References listed on IDEAS

    as
    1. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    2. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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    Cited by:

    1. Michael G Pollitt, 2025. "Scale, governance and net zero: decentralisation vs centralisation in electricity," Working Papers EPRG2504, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Oliver Lewis & Avner Offer, 2022. "Railways as patient capital," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 38(2), pages 260-277.
    3. Jeffrey P. Cohen & Cletus C. Coughlin & Sarosh R. Khan, 2002. "Aviation security and terrorism: a review of the economic issues," Review, Federal Reserve Bank of St. Louis, vol. 84(Sep), pages 9-24.
    4. Hess, David J. & Jordan, Megan L., 2023. "Demunicipalization as political process: Strategic action and the sale of municipal electric utilities in the United States," Utilities Policy, Elsevier, vol. 82(C).
    5. Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 199-222, January.
    6. Voszka, Éva, 2015. "Államosítás, privatizáció és gazdaságpolitika - a főirány széttöredezése [Nationalization and privatization - in the shadow of changing paradigms of economic policy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 717-748.
    7. Rebecca Menes, 2006. "Limiting the Reach of the Grabbing Hand. Graft and Growth in American Cities, 1880 to 1930," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 63-93, National Bureau of Economic Research, Inc.
    8. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    9. Ortega de Miguel, Enrique & Sanz Mulas, Andres, 2007. "A public sector multinational company: The case of Canal de Isabel II," Utilities Policy, Elsevier, vol. 15(2), pages 143-150, June.
    10. Germa Bel & Anton Costas, 2004. "Do public sector reforms get rusty? An empirical analysis on privatization of solid waste collection," Public Economics 0409014, University Library of Munich, Germany.
    11. Pollitt, M. G., 2025. "Scale, Governance and Net Zero: Decentralisation vs Centralisation in Electricity," Cambridge Working Papers in Economics 2513, Faculty of Economics, University of Cambridge.
    12. Donald F. Vitaliano, 2016. "Cost Efficiency of Urban Transport in an Era of Widespread Corruption: the Case of New York Street Railways," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 293-302, September.
    13. Petr Pospíšil & Marian Lebiedzik, 2017. "Some of the Theoretical Basis of Local Self-Government in the Czech Republic," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 31-43, March.

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