What is Driving up the Cost of Highway Construction?

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By Manny Prunty and David Wessel, Brookings Institution

Possible explanation is an increase in the quantity (not the price) of labor. The authors use unionization rates and the average share voting Democrat in presidential campaigns (an indication of a state’s political leanings) over time as proxies for the importance of labor in each state.

Brooks and Liscow also find substantial variation in spending among states: New Jersey, for instance, spent $35 million more per mile than Delaware. They find these differences are not explainable by observable differences in state policy or in the geography of the places where the roads are built.  “This puzzling but striking unexplained residual,” they write, “resembles the large explained residual in health care spending across states and merits further investigation.”

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