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Multilevel Instruments for Infrastructure Investment: Evaluating State Revolving Funds for Water
Author(s) -
Mullin Megan,
Daley Dorothy M.
Publication year - 2018
Publication title -
policy studies journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.773
H-Index - 69
eISSN - 1541-0072
pISSN - 0190-292X
DOI - 10.1111/psj.12228
Subject(s) - investment (military) , revolving door , finance , business , state (computer science) , computer science , political science , law , algorithm , politics
In recent decades, the federal government has introduced complex, multilevel state‐operated revolving loan fund programs as an instrument for promoting state and local investment in national infrastructure priorities while limiting direct federal involvement in implementation. A federally funded state revolving fund (SRF) program combines features of a categorical matching grant to states and a subsidized loan program to localities, both of which should lower the effective price of infrastructure investment and therefore promote higher levels of infrastructure investment. However, little evidence exists to date on whether these programs stimulate new subnational spending or instead displace spending that would have occurred otherwise. We evaluate the stimulus effects of SRFs by examining the two largest such programs, the Clean Water and the Drinking Water SRF Programs. Analyzing 17 years of state‐level panel data, we find evidence that the flow of federal funds to states under the SRF programs stimulates new local investment in wastewater infrastructure, but not in drinking water infrastructure. In discussing several possible explanations for these divergent results, we argue for further research that emphasizes the intergovernmental features of this financing tool.