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Inefficiencies in Local Infrastructure: Evidence from Drinking Water in California

Author

Listed:
  • Pierre Bodere
  • Giulia Brancaccio
  • Karam Kang

Abstract

Local elected officials oversee critical infrastructure, often with limited electoral accountability. This paper studies how this distorts investment across California drinking-water systems. We document that pollution responds to shifts in the political environment, motivating a dynamic model of public investment. We measure welfare returns to investment directly, combining event-study estimates of investment effectiveness and costs with those of residents’ clean-water valuations, recovered from housing choices. Investment choices identify policymakers’ responsiveness to those returns. Weak accountability diverts investment from high-return systems and conventional policies imperfectly offset these distortions: subsidy takeup is misaligned with returns, while uniform mandates induce welfare losses.

Suggested Citation

  • Pierre Bodere & Giulia Brancaccio & Karam Kang, 2026. "Inefficiencies in Local Infrastructure: Evidence from Drinking Water in California," NBER Working Papers 35690, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35690
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L0 - Industrial Organization - - General
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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