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This paper formalizes and empirically tests the hypothesis that the deficient maintenance of public infrastructure is caused by fiscal distress. We utilize a production-decision framework in which public officials combine maintenance and new capital to produce a desired level of capital services. The behavior implied in the fiscal distress hypothesis is treated as perverse deviations from the optimal production path. The empirical findings from cross-sectional expenditures data give support to the fiscal distress hypothesis.


Originally published in:

Bumgarner, Mary, Jorge Martinez-Vazquez, and David L. Sjoquist. "Municipal Capital Maintenance And Fiscal Distress." Review Of Economics & Statistics 73.1 (1991): 33.

Posted with the permission of the publisher, MIT Press.

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