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How Does the Health of Transportation Infrastructure Affect State Credit Ratings? An Empirical Analysis

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  • Can Chen
  • Kenneth A. Kriz
  • Qiushi Wang

Abstract

A well-developed and carefully maintained public infrastructure system is of critical importance to ensure that the economy can function effectively. To investigate the consequence of deficient public transportation infrastructure conditions on states’ creditworthiness, this study constructs an infrastructure health index to measure the physical conditions of state highway transportation systems and empirically estimates the effect of the overall health of state highway transportation infrastructure on Moody’s and Standard and Poor’s state credit ratings by using a data set from 1999 to 2009. The empirical results indicate that the poorer the quality of a state’s highway infrastructure, the lower the probability that the state will be in a higher credit rating category, and the higher the probability that the state will be in the medium or low credit rating category. This finding suggests that state policy makers should be cautioned about the negative consequences of cutting spending on infrastructure maintenance and expansion.

Suggested Citation

  • Can Chen & Kenneth A. Kriz & Qiushi Wang, 2016. "How Does the Health of Transportation Infrastructure Affect State Credit Ratings? An Empirical Analysis," Public Finance Review, , vol. 44(5), pages 660-680, September.
    • Handle: RePEc:sae:pubfin:v:44:y:2016:i:5:p:660-680
    DOI: 10.1177/1091142115611742
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