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Deterioration of Public Capital and Optimal Policy of Local and Central Government

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  • Tadashi Yagi

    (Faculty of Economics, Nagoya University, Furocho 1, Chikusa-ku, Nagoya 464, Japan)

Abstract

Deterioration of public capital in the US has been reported to be in crisis since the mid 1970s. There is an argument which insists that the deterioration is caused by the shortage of expenditure on the maintenance of public capital. The budget allocation for maintenance is not a technological problem. The purpose of this paper is to analyse the following three issues by describing both local and central government behaviour. First, the optimal conditions for the allocation of maintenance expenditure are examined. Secondly, the impact of the differences in preference of residents for public capital used for amenity and maintenance is examined. Finally, we examine the condition for the case where provision of subsidy from the central government to a local government creates a large loss of efficiency.

Suggested Citation

  • Tadashi Yagi, 1995. "Deterioration of Public Capital and Optimal Policy of Local and Central Government," Urban Studies, Urban Studies Journal Limited, vol. 32(1), pages 123-134, February.
    • Handle: RePEc:sae:urbstu:v:32:y:1995:i:1:p:123-134
    DOI: 10.1080/00420989550013257
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    References listed on IDEAS

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    1. MICHEL, Philippe & PESTIEAU, Pierre & THISSE, Jacques-François, 1983. "Regional allocation of investment with distributive objectives," LIDAM Reprints CORE 523, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Okuno, Nobuhiro & Yagi, Tadashi, 1990. "Public investment and interregional output-income inequalities," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 377-393, November.
    3. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    4. Akira Takayama, 1967. "Regional Allocation of Investment: A Further Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 81(2), pages 330-337.
    5. Peterson, George E, 1986. "Urban Road Reinvestment: The Effects of External Aid," American Economic Review, American Economic Association, vol. 76(2), pages 159-164, May.
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    Cited by:

    1. Brian A. Mikelbank & Randall W. Jackson, 2000. "The Role of Space in Public Capital Research," International Regional Science Review, , vol. 23(3), pages 235-258, July.
    2. Pierre Filion, 2000. "Balancing Concentration and Dispersion? Public Policy and Urban Structure in Toronto," Environment and Planning C, , vol. 18(2), pages 163-189, April.

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