Question

rivers, lakes and revenue streams: the heterogeneous effects of clean water act grants on local spending

Answer 1

The work Pat Flynn and Tucker Smith co-authored was published in the Journal of Public Economics' August 2022 edition. Pat Flynn (PhD '22, now at Cornerstone Research) and Tucker Smith are both economics PhD candidates. "River, Lakes and Revenue Streams: The Heterogeneous Effects of Clean Water Act Grants on Local Spending" is the title of the research study.

• Grants of $167 billion (2020 dollars) were provided by the Clean Water Act (CWA) to local governments for the improvement of wastewater treatment. With a difference-in-differences methodology, we take advantage of heterogeneity in the date of grant receipt to calculate the impact of CWA payments on local expenditure. Sewerage capital expenditures rose by $0.45 on average for every dollar in grant money.
• When the benefit-to-cost ratios of CWA funds are divided by this estimate, it is projected that towns received an average return of $1.01 for every dollar they spent on sewage capital using CWA funding. The Act also established new capital criteria for all wastewater treatment plants in the US in addition to providing awards.
• We demonstrate that CWA grants increased sewerage capital spending dollar for dollar up to the amount required to pay for the expenses of newly mandated capital upgrades by the CWA, but after municipalities met these capital requirements or if the capital mandate was not legally binding, they decreased their own spending on sewerage capital in response to grant receipt. Municipalities subsequently reduced water prices for locals to disperse grant money.

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