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People, Party or Money? Determinants of Local Government Infrastructure Investment

Author

Listed:
  • Katja Rietzler

    (Macroeconomic Policy Institute (IMK))

  • Christian Raffer

    (German Institute of Urban Affairs)

Abstract

Drivers of local public infrastructure investment have preoccupied researchers for decades. In Germany, Europe’s largest economy, there is an increasing awareness since deteriorating infrastructure quality seems to become a considerable risk for economic growth. In addition to fiscal restrictions, another aspect is becoming increasingly important for investment activity at the municipal level in times of ageing societies which has been neglected by most studies so far: personnel capacities. We investigate the issue for a sample of local governments in the German state of North Rhine-Westphalia for the period from 2009 to 2023. The results of a dynamic panel corroborate the well-known relevance of the revenue situation as well as a trade-off between social and investment expenditure. What we contribute to existing literature is robust evidence regarding the role of a local governments’ capacity to implement investment policies – measured as full-time equivalents in local building departments.

Suggested Citation

  • Katja Rietzler & Christian Raffer, 2026. "People, Party or Money? Determinants of Local Government Infrastructure Investment," IMK Working Paper 230-2026, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:230-2026
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    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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