“The Efficiency of Local Government: The Role of Privatization and Public Sector Unions” with Matthew E. Kahn and Shanjun Li (Journal of Public Economics (2017), 154: 95-121)
Selected press coverage: Forbes
Local governments spend roughly $1.6 trillion per year to provide a variety of public goods ranging from police and fire protection to public schools and public transit. Despite the fact that a sizable amount of economic activity is supplied by local governments, we know little about this sector’s productivity in delivering key services. We argue that the operating cost of providing public transit bus miles offers a standardized output for benchmarking the cost of local government service provision both over time and across space. We measure the cost savings from privatization and study the cost premium associated with unionization. We explore the political economy of why privatization rates are lower in high cost unionized areas.
This paper estimates first, how local governments finance federal mandates and, second, how much value local residents place on mandated local spending using a change in federal rules on municipal infrastructure following the 1972 Clean Water Act (CWA). I leverage the role of river networks in distributing pollutants across cities, combined with pre-CWA state regulatory intensity, to account for the endogeneity of municipal infrastructure adoption decisions, and to predict ex ante compliance with the CWA infrastructure mandate. Cities under the burden of compliance experienced substantial improvements to local ambient water quality as well as a three-fold increase in resident fees. Public spending on non-mandated items did not change, indicating that mandates are unlikely to displace local funding of other goods and services. The simultaneous increases to water quality and local costs resulted in taste-based sorting. However, I find that resident value of the mandated infrastructure depends upon the complementarity of surface water quality to pre-existing local features, as well as exposure to upstream polluters. These results imply that mandates may reduce inefficiencies to local public goods provision and provide positive benefits that are valued no less than their costs to local residents
“Road Rationing Policies and the Spatial Distribution of Wealth in Beijing” with Panle Barwick, Shanjun Li, and Jing Wu
This paper utilizes Beijing’s city-wide road rationing policy along with rich micro data on housing transactions and resident demographics to identify how road rationing policies impact the spatial distribution of wealth within cities. We find that Beijing’s rationing policy significantly increased the demand for housing near subway stations as well as central business districts. Pre-trends shows that the premium for proximity is stable in the periods prior to the driving restriction, but shift significantly in the aftermath of the policy. The shift in the demand for proximity does not appear to be driven by unobserved correlated shocks or broader investment in areas that receive new subway stations. Further, we find the composition of individuals living proximate to subway stations as well as proximate to Beijing’s central business districts shifted toward wealthier households. Our findings are consistent with theoretical predictions of the monocentric city model with income-stratified transit modes. These results provide suggestive evidence that city-wide road rationing policies can have the unintended consequence of limiting access to public transit for lower income individuals.
Works in Progress
“Determinants of the Gender-Commute Gap among Married Couples in Beijing” with Shanjun Li and Jing Wu
“Why do Low Skill workers Live in ‘Superstar’ Cities?” with Caitlin Gorback