Maximizing Efficiency in State Infrastructure Finance: The Role of Competition, Citizen Monitoring Capacity, and Institutions

Abstract

In the United States, despite record levels of public infrastructure spending, evidence on rising traffic congestion and deteriorating infrastructure condition raises questions about the efficiency of government infrastructure spending. This research aims at empirically assessing and explaining the relative efficiency in producing public highway infrastructure outcomes among American states. To achieve this purpose, a semiparametric analysis—the two-stage double bootstrap data envelopment analysis method—is applied to examine how highway infrastructure efficiency scores can be estimated and explained by a number of exogenous variables among 47 American states from 1995 to 2009. This study finds that there is a large efficiency variation among states in terms of producing quality highway infrastructure services. Furthermore, interstate competition, jurisdiction size, fiscal capacity, and political and fiscal institutions are the key factors influencing the efficiency performance of state highway infrastructure systems.