87 Pages Posted: 5 Aug 2019
Date Written: July 31, 2019
There is widespread consensus that US infrastructure investment — and infrastructure quality — has been on the decline. In response, politicians across the ideological spectrum have called for increased infrastructure spending. How much infrastructure we would get depends on how much output is produced per dollar of spending. Yet we know surprisingly little about infrastructure costs across time and place. We help to fill this gap by using data we digitized on the Interstate highway system — one of the nation’s most valuable infrastructure assets — to document spending per mile over the history of its construction.
We make two main contributions. First, we find that spending per mile on Interstate construction increased more than three-fold (in real terms) from the 1960s to the 1980s. We date the inflection point of increase to the early 1970s. We further show that changes in observed geography over time do not explain these changes. Second, we provide suggestive evidence of the determinants of the increase in spending per mile. In particular, the increased spending per mile coincides with the rise of “citizen voice” in government decision-making in the early 1970s. And rising incomes and housing prices nearly completely statistically explain the increase in costs. We also largely rule out several common explanations for rising costs, such as increases in per-unit labor or materials prices.
Keywords: infrastructure, highways, public participation, environmental review
JEL Classification: H4, H5, H7, K0, N4, N7, N9, R4
Suggested Citation: Suggested Citation