Changing the price of pork: the impact of local cost sharing on legislators' demands for distributive public goods

The provision of public services through national legislatures gives legisl ators the chance to fund locally beneficial public projects using a shared national tax base. Nationally financed and provided local (congestible) pub lic goods will be purchased at a subsidized price below marginal cost and m ay be inefficiently too large as a consequence. An important assumption beh ind this inefficiency is that national legislators in fact demand more of t he locally beneficial project as the local price for projects declines. Thi s paper provides the first direct test of this important assumption using l egislators' project choices following the passage of the Water Resources De velopment Act of 1986 (WRDA'86). We find legislators' chosen water project sizes do fall as the local cost share rises, with a price elasticity of dem and ranging from - 0.81 for flood control and shoreline protection projects to - 2.55 for large navigation projects. The requirement of WRDA'86 that l ocal taxpayers contribute a greater share to the funding of local water pro jects reduced overall proposed project spending in our sample by 35% and th e federal outlay for proposed project spending by 48%. (C) 1999 Elsevier Sc ience S.A. All rights reserved.