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Municipal Construction Spending: An Empirical Examination

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Author Info
Douglas Holtz-Eakin
Harvey S. Rosen

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Abstract

Despite widespread concern and discussion, no consensus exists concerning the causes of the "infrastructure crisis." We investigate several models of the determination of local public capital expenditures. Using Euler equation methods, we find that the hypothesis that construction spending is determined by unconstrained, forward looking municipal planning cannot be rejected. consistent with this result, we find that the stochastic structure of own revenue and grant flows is an important feature of the determination of construction spending. Only unanticipated changes in a community's resources alter its demand for structures. An unanticipated increase in resources of one dollar increases current construction spending by about 5.5 cents.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2989.

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Date of creation: Apr 1993
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Publication status: published as Economics and Politics, Vol. 5, No. 1, pp. 61-84 (March 1993).
Handle: RePEc:nbr:nberwo:2989

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  1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December. [Downloadable!] (restricted)
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  2. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
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  3. Hulten, Charles R, 1984. "Productivity Change in State and Local Governments," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 256-66, May. [Downloadable!] (restricted)
  4. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November. [Downloadable!] (restricted)
  5. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(2), pages 7-46, May. [Downloadable!] (restricted)
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  6. Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September. [Downloadable!] (restricted)
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  7. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November. [Downloadable!] (restricted)
  8. Hulten, Charles R & Peterson, George E, 1984. "The Public Capital Stock: Needs, Trends, and Performance," American Economic Review, American Economic Association, vol. 74(2), pages 166-73, May. [Downloadable!] (restricted)
  9. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February. [Downloadable!] (restricted)
  10. Eisner, Robert & Pieper, Paul J, 1986. "A New View of the Federal Debt and Budget Deficits: Reply," American Economic Review, American Economic Association, vol. 76(5), pages 1156-57, December. [Downloadable!] (restricted)
  11. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
  12. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
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  1. Borge, Lars-Erik & Dahlberg, Matz & Tovmo, Per, 2001. "The Intertemporal Spending Behavior of Local Governments: A Comparative Analysis of the Scandinavian Countries," Working Paper Series 2001:10, Uppsala University, Department of Economics. [Downloadable!]
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  2. Ed Baldson & Eric Brunner, 2003. "Intergenerational Conflict and the Political Economy of School Spending," Working papers 2003-24, University of Connecticut, Department of Economics. [Downloadable!]
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  3. Douglas Holtz-Eakin & Harvey S. Rosen & Schuyler Tilly, 1994. "Intertemporal Analysis of State and Local Government Spending: Theory ad Tests," NBER Working Papers 4261, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Lars-Erik Borge & Per Tovmo, 2007. "Myopic or constrained by balanced-budget-rules? The intertemporal spending behavior of Norwegian local governments," Working Paper Series 8807, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
  5. Antoni Castells & Daniel Montolio & Albert Solé, 2006. "Infrastructure investment across Spanish regions: determinants and calculation of an expenditure needs index," Hacienda Pública Española, IEF, vol. 127(3), pages 23-54, September. [Downloadable!]
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