Stanford Woods Environmental Forum featuring Megan Mullin
Associate Professor of Polical Science
Fiscal Federalism and Spillover Benefits: Evidence from Water Infrastructure Investment
Local water infrastructure in the United States has long been underfunded, creating operational vulnerabilities that jeopardize public health and environmental quality. Megan Mullin will present research on the effectiveness of financial assistance from the federal government in stimulating local investment in water infrastructure. Theories of fiscal federalism predict that grants from a central government should have greater effect on subnational spending for goods whose benefits spill over into neighboring jurisdictions, because those goods are less likely to be provided from the private income of community residents. Evidence from two nearly identical loan programs--one for wastewater infrastructure and one for drinking water infrastructure--demonstrates that federally subsidized infrastructure loans have a large and significant effect on local wastewater investments whose benefits spill over to downstream communities, but not on drinking water expenditures whose benefits are mostly concentrated in the immediate jurisdiction. Moreover, the stimulus effect of wastewater grants varies with the number of cities discharging into the same watershed. These discoveries have important implications for our understanding of fiscal federalism and for the design of public policy intended to promote investment in water quality protection.
You are invited to stay for a reception following the forum.