DO INSTITUTIONS MATTER? AN EMPIRICAL NOTE

A reading of the current literature suggests that no decision has been made on the question of whether municipal governments matter. Evidence from a pooled sample of 26 large US cities for the years 1960, 1965, 1970, 1975, and 1980 suggests that these institutions do matter. The main constraints on the procedure were: 1. population size, 2. continuity of government form during the 1960-1980 period, and 3. homogeneity of service provision. The results show that both per capita public capital stocks and public capital-labor ratios are higher in directly elected mayor and city council (EMC) cities than in cities administered by a city manager (CM), all other things being equal. It is suggested that, if a CM city had been administered by an elected mayor during this period, its total stock of public capital would have been, on average, 12.5% larger. The analysis does not lead to any conclusions about the relative efficiency of EMC and CM cities with respect to public capital. The findings suggest that the form of the municipal government may play a large role in the public investment decision.