This work would not have been possible without the support of Ludger Gailing and Talja Blokland--thank you. I also want to thank Britta Klagge, Fulong Wu and three anonymous reviewers for their invaluable feedback and the time they dedicated. And last, many thanks to Frederick Coulomb and Srishti Kochhar. I hope to collaborate with you in the future. Open access funding enabled and organized by Projekt DEAL.

Drawing from Scharpf's joint decision making approach and his concept of the joint decision trap, the following paper researches the development of municipal infrastructure investment in relation to the overall financial situation. The analyzed data are being provided by a representative panel survey among 4,000 German municipalities conducted in 2016 by the German Institute of Urban Affairs. The starting point of the analysis is the description of a dilemma: growing financial disparities between the municipalities and a loss‐making infrastructure of many cities and towns leads to an institutionalization of a growing number of grant programmes and forms of mixed financing. These programmes—so the analysis guiding thesis—do not provide adequate solutions for the heterogeneity of municipal needs. By neglecting their individual needs they cannot take into account the growing disparities of municipal financial situations. Rather, they produce an institutional setting, which fosters sub‐optimal policy‐outcomes and is resilient to changes.

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