Why Are We Lagging Behind? An Empirical Analysis of Municipal Capital Spending in the United States

Abstract

This research examines the determinants of municipal capital investment in the United States. Using a data set of 100 large cities in five select years over 1992-2012, the regression analysis finds that local tax and expenditure limitations and legal debt limitations restrict municipal capital spending. The receipt of intergovernmental revenue, governmental fund balance, and some demographic factors have significant effects on the capital outlays. The empirical findings shed light on how to address the lag of critical investment in infrastructure at the municipal level in the United States.

Patterns of urban infrastructure capital investment in Chinese cities and explanation through a political market lens

“…Socioeconomic status, such as income, is an important predictor of capital investment. Demand for public goods generally increases in wealthier communities (Fisher, 2007), but mixed results are also reported between investment amount and household income under different conditions (Bates & Santerre, 2014;Fisher & Wassmer, 2015;Kwon, 2006;W. Wang & Wu, 2017).…”

“…Urban scaling laws suggest that city population is sublinearly correlated with infrastructure growth, indicating scale economies in city infrastructure systems (Bettencourt, Lobo, Helbing, Kuhnert, & West, 2007;Ramaswami, Jiang, Tong, & Zhao, 2018). Studies indicate that population growth rates positively influence capital spending on infrastructure in the United States (Fisher & Wassmer, 2015;W. Wang & Wu, 2017), whereas the percentage of senior population has a negative impact on the investment level (Fisher & Wassmer, 2015).…”

“…Wang & Wu, 2017). Capital spending on infrastructure at the local level is also sensitive to tax rates, current infrastructure stock, and the urban spatial form, all of which affect the cost of the public services (Bates & Santerre, 2014;Fisher & Wassmer, 2015;W. Wang & Wu, 2017).…”

“…Regarding demographics, total registered population and annual population growth rate are commonly used, as we apply here. In addition, we use urbanization rate to measure population structure rather than the percentage of elderly population indicating population structure (Fisher & Wassmer, 2015;W. Wang & Wu, 2017).…”

“…It was found that capital spending per capita at the state and local levels was positively correlated with general state product per capita (Fisher & Wassmer, 2015). Local government fiscal conditions, including fiscal capacity and fiscal stress, also influence public spending on infrastructure (Bates & Santerre, 2014;Fisher & Wassmer, 2015;Kwon, 2006;W. Wang & Wu, 2017).…”