Paul Romer, charter cities and lessons from historical big infrastructure?

Abstract

This paper looks in detail at an innovative idea for new city governance promulgated by Nobel Prize-winning economist Paul Romer, that of charter cities. The main methodological conundrum in evaluating Romer's model is that there is no existing charter city to which he or others can use to demonstrate the developmental success or otherwise of the concept. This paper uses two innovative case studies to test Romer's idea. These case studies are the Suez Canal Company and the Panama Canal Company. These two companies received charters, were tasked with building cities (and infrastructure), were given long-term leases over land, and had sovereign guarantors – the two canals were in effect Romer-esque Charter City projects. This paper uses these case studies to examine issues related to the operation of a sovereign guarantee, financing new city construction, and the distributional consequences of new cities. The global renaissance in big infrastructure construction, much of which is being done under charter-like rules, gives the idea of charter cities a striking contemporary relevance.