Water, Water, Everywhere: Municipal Finance and Water Supply in American Cities

47 Pages Posted: 1 Mar 2005

See all articles by David M. Cutler

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Grant Miller

Stanford University - School of Medicine; National Bureau of Economic Research (NBER)

Date Written: January 2005

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.

Suggested Citation

Cutler, David M. and Miller, Grant, Water, Water, Everywhere: Municipal Finance and Water Supply in American Cities (January 2005). NBER Working Paper No. w11096. Available at SSRN: https://ssrn.com/abstract=657621

David M. Cutler (Contact Author)

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Grant Miller

Stanford University - School of Medicine ( email )

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United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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