Fiscal Decentralization and Public Infrastructure Maintenance Expenditures: A Cross-Country Panel Analysis

Can Chen and Jorge Martinez-Vazquez ()
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Can Chen: Andrew Young School of Policy Studies, Georgia State University

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: The often-forgotten dimension of public infrastructure finance is the difficulty of maintaining a proper level of infrastructure in good condition. Given that increasing responsibilities for public infrastructure investment have been decentralized worldwide, this study investigates the impact of fiscal and political decentralization on infrastructure maintenance expenditures using a panel cross-country analysis from 1995 to 2020. To address the endogeneity concerns and estimate the causal impact of fiscal decentralization (revenue and expenditure decentralization), this research uses the Geographic Fragmentation Index (GFI) and country size as two valid instrumental variables for fiscal decentralization. Our main results confirm that fiscal and political decentralization measures are found to increase public spending on road maintenance. The findings are robust to alternative model specifications and different measures of fiscal and political decentralization.

Pages: 59 pages
Date: 2023-12
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper2323

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