14th journées Louis-André Gérard-Varet

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Investments and maintenance: Easy targets when governments cut budgets?
Lars-Erik Borge, Arnt O. Hopland

Last modified: 2015-05-06


The paper adds to the scarce empirical literature on the determinants of public
investments and related expenditures. A main contribution is that we investigate how
both maintenance and investments are aect by scal and political variables using
data for Norwegian local governments. There is strong evidence that investments and
maintenance are more sensitive to scal variables than other expenditures, i.e. they are
easy targets when budgets are to be cut. It is a plausible hypothesis that maintenance,
because of lower visibility, is even more sensitive to scal variables than investement, but
the evidence for this hypothesis is mixed. Finally, political fragmentation is associated
with low levels of maintenance, but does not seem to aect investments.


Fiscal distress; political fragmentation; maintenance; public investment