Municipal Capital Maintenance and Fiscal Distress

Mary Bumgarner, Jorge Martinez-Vazquez () and David Sjoquist

The Review of Economics and Statistics, 1991, vol. 73, issue 1, 33-39

Abstract: This paper formalizes and empirically tests the hypothesis that the deficient maintenance of public infrastructure is caused by fiscal distress. The authors utilize a production-decision framework in which public officials combine maintenance and new capital to produce a desired level of capital services. The behavior implied in the fiscal distress hypothesis is treated as perverse deviations from the optimal production path. The empirical findings from cross-sectional expenditures data give support to the fiscal distress hypothesis. Copyright 1991 by MIT Press.

Date: 1991
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