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