Local Public Good Provision under Uncertainty: Do Monopoly Bureaus Wield Carrots — or Sticks?

Abstract

This paper expands the theory of monopoly government behavior by specifying the locally provided good as differentially allocated across residents of a single jurisdiction. Our specification allows direct examination of the within-city distribution decision of the monopoly bureau. Empirical estimation finds considerable support for the thesis that bureaucrats use locally provided goods as "carrots" (constituency creation) rather than as "sticks" (threat points) to influence voter behavior. Estimation of the voter model further establishes the constituency creation hypothesis. The estimated taste parameters also indicate that the bureau has a marginal willingness to pay for subways considerably above the supply price.