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Valuing Public Goods More Generally: The Case of Infrastructure

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Listed:
  • David Albouy

    (University of Illinois)

  • Arash Farahani

    (University of Illinois)

Abstract

We examine the relationship between local public goods, prices, wages, and population in an equilibrium inter-city model. Non-traded production, federal taxes, and imperfect mobility all affect how public goods (or “amenities” more broadly) should be valued from data. Reinterpreting the estimated effects of public infrastructure on prices and wages in Haughwout (2002), we find infrastructure over twice as valuable with our more general model. New estimates based on more years, cities, and data-sets indicate stronger wage and positive population effects of infrastructure. These imply higher values of infrastructure to firms, and also to households if moving costs are substantial.

Suggested Citation

  • David Albouy & Arash Farahani, 2017. "Valuing Public Goods More Generally: The Case of Infrastructure," Upjohn Working Papers 17-272, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:17-272
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    Cited by:

    1. Jerch, Rhiannon & Kahn, Matthew E. & Lin, Gary C., 2023. "Local public finance dynamics and hurricane shocks," Journal of Urban Economics, Elsevier, vol. 134(C).
    2. Marco Bassetto & Leslie McGranahan, 2021. "Mobility, Population Growth, and Public Capital Spending in the United States," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 255-277, July.
    3. Albouy, David & Farahani, Arash & Kim, Heejin, 2018. "Productivity and Quality-of-Life Benefits to Rural Infrastructure," Issue Reports 277657, Farm Foundation.
    4. T. Daniel Woodbury, 2020. "The provision of infrastructure: benefit–cost criteria for optimizing local governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 552-574, June.

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    More about this item

    Keywords

    Infrastructure; public goods; capitalization; valuation; nontraded goods; federal taxation; imperfect mobility;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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