Tuesday, June 6, 2017

One Reason for Our Infrastructure Woes

From economist Matthew Kahn - - 

"Yes, NYC has an old subway system but that doesn't explain the interesting fact presented in the NY Times today that the C trains are over 53 years old.   Binding budget constraints provide the explanation for why this rich city (that relies on public transit) isn't investing in public capital.  As we document in this NBER Paper,  progressive big cities generously pay unionized public sector workers.   Due to the Buy America Mandate, such cities also pay more than the international price for pieces of capital (read our 2015 JUE paper).  The combination of paying public labor a very high salary and benefits plus high capital purchase costs means that there is little $ left for investing in capital replacement and upgrading.  #budget_contraints_matter"

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