Abstract
Addressing environmental and energy security challenges faced by the United States, the Bipartisan Infrastructure Law of 2021 (BIL) greatly increased federal funding for transportation. Yet, the efficiency of such investments is uncertain. Previous literature has found both crowding-out of other types of funding and the opposite “flypaper effect’’. I contribute to this debate by analysing federal investment in public transit, which is a substantial part of BIL. Using a spike in federal transit funds due to the American Recovery and Reinvestment Act of 2009 (ARRA), I estimate their effect on local investment decisions. Since most of the monies was allocated using a pre-existing formula and local characteristics, my exogeneity assumption is transparent and consistent with multiple robustness tests. I find a particularly strong “flypaper effect’’: each additional $1 of ARRA grants increased total transit expenditures on capital by $10 in the following ten years. In the first five years, the differential expenditures are majorly driven by the increased application for other discretionary federal programs. In the following five years, expenditures from state programs have the biggest effect. This suggests that additional federal funds lead to large expansionary efforts by local authorities that persist long after the initial funds are spent.
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
