Valuing Public Goods More Generally: The Case of Infrastructure

Upjohn Institute working paper; 17-272

53 Pages Posted: 7 Jun 2017

See all articles by David Albouy

David Albouy

University of Illinois at Urbana-Champaign

Arash Farahani

University of Illinois at Urbana-Champaign

Date Written: March 19, 2017

Abstract

We examine the relationship between local public goods, prices, wages, and population in an equilibrium inter-city model. Non-traded production, federal taxes, and imperfect mobility all affect how public goods (or “amenities” more broadly) should be valued from data. Reinterpreting the estimated effects of public infrastructure on prices and wages in Haughwout (2002), we find infrastructure over twice as valuable with our more general model. New estimates based on more years, cities, and data-sets indicate stronger wage and positive population effects of infrastructure. These imply higher values of infrastructure to firms, and also to households if moving costs are substantial.

Keywords: Infrastructure, public goods, capitalization, valuation, nontraded goods, federal taxation, imperfect mobility

JEL Classification: H54, H2, H4, J3, R2

Suggested Citation

Albouy, David and Farahani, Arash, Valuing Public Goods More Generally: The Case of Infrastructure (March 19, 2017). Upjohn Institute working paper; 17-272, Available at SSRN: https://ssrn.com/abstract=2981752 or http://dx.doi.org/10.2139/ssrn.2981752

David Albouy (Contact Author)

University of Illinois at Urbana-Champaign ( email )

Arash Farahani

University of Illinois at Urbana-Champaign ( email )

1408 W. Gregory Dr.
Urbana, IL 61801
United States

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