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Bureaucracy, Infrastructure and Economic Growth: Evidence from U.S. Cities during the Progressive Era
James Rauch
June 1994 |
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| Recent work in the sociology of economic development has emphasized the establishment of a professional government bureaucracy in place of political appointees as an important component of the institutional environment in which private enterprise can flourish. I hypothesize that establishment of such a bureaucracy will lengthen the period that public decision makers are willing to wait to realize the benefits of expenditures, leading to allocation of a greater proportion of government resources to long-gestation period projects such as infrastructure. I also hypothesize that this increased government investment in inputs complementary to private capital will increase the rate of economic growth. These hypotheses can be tested using data generated by a "natural experiment" in the early part of this century, when a wave of municipal reform transformed the governments of many US cities. Controlling for city and time effects, adoption of Civil Service is found to increase the share of total municipal expenditure allocated to road and sewer investment. This share in turn has a positive effect on growth in city manufacturing employment in a model with time effects and city random effects but not a model with both time and city fixed effects. |
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| Last updated on: 12/21/2006 |
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