Association for Public Policy Analysis & Management

The investment in infrastructure in the United States has lagged behind other major economies in recent decades. The assessments conducted by the U.S. Department of Transportation and others come to the consensus that governments-federal, state and local alike-are not spending sufficiently on infrastructure improvements. For this reason, both presidential candidates promised a huge amount of infrastructure investment during their presidential campaigns in 2016. Most recently, President Trump pledged to create a program that funds $1 trillion in new infrastructure programs. As state and local governments provide the bulk of the total public sector investment in infrastructure construction, it is imperative to improve evidence-based decision-making with regard to state and local government capital investment.

Similar to the lagged investment in infrastructure, the academic research on capital investment is also surprisingly limited with relatively little academic inquiry on this topic in recent decades. We intend to fill a niche in this literature by examining the determinants of capital spending by large cities in the United States. Based on previous literature, we develop a model that accounts for the lumpy nature of local capital investment and recognizes the derived nature of demand for public capital. The data come from a newly completed dataset from the Fiscal Policy Space project, which includes a large number of variables about 100 large U.S. cities, and the dataset compiled based on the U.S. Census Bureau’s Census of Government for over a 20-year period. We anticipate that the empirical results of such a study will shed light on how to reverse the lag of critical investment in infrastructure in the United States.