NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bureaucracy, Infrastructure, and Economic Growth: Evidence from U.S. Cities During the Progressive Era

James E. Rauch

NBER Working Paper No. 4973
Issued in December 1994
NBER Program(s):   EFG   PE

Recent work in the sociology of economic development has emphasized the establishment of a professional 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. This hypothesis 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 U.S. 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. Other estimates imply that this increased share raises the growth rate of city manufacturing employment by one-half percent per year.

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Document Object Identifier (DOI): 10.3386/w4973

Published: American Economic Review, Vol. 85 (September 1995): 968-979. citation courtesy of

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