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Municipal Construction Spending: An Empirical Examination

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  • DOUGLAS HOLTZ-EAKIN
  • HARVEY S. ROSEN

Abstract

Despite widespread concern and discussion, no consensus exists concerning the causes of the "infrastructure crisis" or its implications for the efficiency of government decision-making more generally. We investigate several models of the determination of local public capital expenditures. Using Euler equation methods, we cannot reject the hypothesis that construction spending is determined by unconstrained, forward looking municipal planning. Consistent with this result, the stochastic structure of resource flows is an important feature of the determination of construction spending. Only unanticipated changes in a community's resources alter its demand for structures, with an unanticipated increase of one dollar increasing current construction spending by about 5.6 cents. Copyright 1993 Blackwell Publishers Ltd..

Suggested Citation

  • Douglas Holtz-Eakin & Harvey S. Rosen, 1993. "Municipal Construction Spending: An Empirical Examination," Economics and Politics, Wiley Blackwell, vol. 5(1), pages 61-84, March.
  • Handle: RePEc:bla:ecopol:v:5:y:1993:i:1:p:61-84
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    Cited by:

    1. Fabio Padovano, 2014. "Distribution of transfers and soft budget spending behaviors: evidence from Italian regions," Public Choice, Springer, vol. 161(1), pages 11-29, October.
    2. 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.
    3. Janusz Mrozek, 2000. "Changes over time in the decision to adopt curbside recycling," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(2), pages 239-253, June.
    4. Balsdon, Ed & Brunner, Eric J. & Rueben, Kim, 2003. "Private demands for public capital: evidence from school bond referenda," Journal of Urban Economics, Elsevier, vol. 54(3), pages 610-638, November.
    5. Jean-Michel Josselin & Fabio Padovano & Yvon Rocaboy, 2013. "Grant legislation vs. political factors as determinants of soft budget spending behaviors. Comparison between Italian and French regions," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(3), pages 317-354, December.
    6. Lars-Erik Borge & Arnt O. Hopland, 2017. "Schools and public buildings in decay: the role of political fragmentation," Economics of Governance, Springer, vol. 18(1), pages 85-105, February.
    7. Lars-Erik Borge & Per Tovmo, 2009. "Myopic or Constrained by Balanced-Budget Rules? The Intertemporal Spending Behavior of Norwegian Local Governments," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 200-219, June.
    8. Brunner, Eric & Balsdon, Ed, 2004. "Intergenerational conflict and the political economy of school spending," Journal of Urban Economics, Elsevier, vol. 56(2), pages 369-388, September.
    9. Luc Eyraud & Marialuz Moreno Badia, 2013. "Too Small to Fail? Subnational Spending Pressures in Europe," IMF Working Papers 13/46, International Monetary Fund.
    10. Castells, Antoni & Sole-Olle, Albert, 2005. "The regional allocation of infrastructure investment: The role of equity, efficiency and political factors," European Economic Review, Elsevier, vol. 49(5), pages 1165-1205, July.
    11. 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. 178(3), pages 23-54, September.

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