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Local Public Infrastructure Showing Signs of Wear and Tear

Author

Listed:
  • Martin Gornig
  • Claus Michelsen
  • Kristina van Deuverden

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current levels of investment are not sufficient to offset this decline, and the infrastructure is becoming increasingly outdated and limited in its scope.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.

Suggested Citation

  • Martin Gornig & Claus Michelsen & Kristina van Deuverden, 2015. "Local Public Infrastructure Showing Signs of Wear and Tear," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 5(42/43), pages 561-567.
    • Handle: RePEc:diw:diwdeb:2015-42-3
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    More about this item

    Keywords

    local public investment; local infrastructure; fiscal equalization;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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