Local Public Infrastructure Showing Signs of Wear and Tear

Martin Gornig, Claus Michelsen and Kristina van Deuverden ()

DIW Economic Bulletin, 2015, vol. 5, issue 42/43, 561-567

Abstract: Investment in public infrastructure is essential to ensure competitiveness and create growth potential. Although Germany certainly has a well-developed infrastructure compared to other countries, local public infrastructure has been in decline for many years now. This means that current levels of investment are not sufficient to offset this decline, and the infrastructure is becoming increasingly outdated and limited in its scope. In order for this backlog of local public investment to at least not continue growing, a rapid change in policy is urgently needed. The creation of a special central government fund to encourage investment in financially weak areas is a step in the right direction. Given the enormity of the local public investment backlog, a massive increase in immediate financial assistance seems imperative. At the same time, a systematic approach must be developed to compensate for the chronic underfunding of certain types of municipality. One improvement might be to take proper account of the financial weakness of the municipalities in fiscal equalization among the federal states.

Keywords: local public investment; local infrastructure; fiscal equalization (search for similar items in EconPapers)
JEL-codes: H54 H76 H77 (search for similar items in EconPapers)
Date: 2015
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