Abstract
The efficacy of targeted intergovernmental transfers depends on whether they displace or attract other funds. This paper examines the impact of federal grants for public transit on state and local government spending decisions in the United States. Leveraging the 2009 American Recovery and Reinvestment Act (ARRA) as a natural experiment, I employ a Difference-in-Differences approach with continuous treatment. I find that each $1 of ARRA transit funding generated $3.9 of additional capital expenditures over the subsequent eleven years. This increase operates through two key channels: an initial increase in federally-funded expenditures with no displacement of existing state and local funds (a phenomenon known as the flypaper effect), followed by a significant crowding-in of additional state and local investment beyond that. Crowding-in is more pronounced in larger Urbanized Areas and those with existing rail systems, suggesting potential roles for political influence, large upfront costs, and cost overruns in driving this effect.
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
Technical, Political, and Social Responses
KEYWORDS
Environmental Policies, Transportation, Public Transit, Intergovernmental Transfers, Public Investments
