Working Paper: NBER ID: w11096
Authors: David Cutler; Grant Miller
Abstract: The construction of municipal water systems was a major event in the history of American cities -- bringing relief from disease, providing resources to combat fires, attracting business investment, and promoting development generally. Although the first large-scale municipal water system in the United States was completed in 1801, many American cities lacked waterworks until the turn of the twentieth century. This paper investigates the reason for the century-long delay and the subsequent frenzy of waterworks construction from 1890 through the 1920s. We propose an explanation that emphasizes the development of local public finance. Specifically, we highlight the importance of municipal bond market growth as a facilitator of debt finance. We argue that this explanation is superior to others put forward in the literature, including disease knowledge, the presence of externalities, municipal population density, natural monopoly, contracting difficulties, corruption costs, and growth in the supply of civil engineers.
Keywords: No keywords provided
JEL Codes: N4; I1; H4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Growth of municipal bond markets (H74) | Expansion of municipal water systems (L95) |
| Improvements in public finance (H69) | Increased municipal ownership of water systems (L95) |
| Expansion of municipal water systems (L95) | Response to failures of private companies (H12) |
| Growth of municipal bond markets (H74) | Rise of public ownership of water systems (L95) |