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Working Paper

Economic Estimates of Urban Infrastructure Needs

This paper criticizes commonly employed measures of capital-spending needs and offers an alternative method for constructing needs estimates. The usual technical estimate of needs compares an inventory of current conditions with some "ideal" level of capital stock, and is inadequate because of the arbitrary (and sometimes unrealistic) benchmarks that are employed in its construction. The alternative economic measure proposed here is based on a model of city spending decisions. Using these estimated parameters, this method provides a measure of the typical or average spending patterns of policymakers, and controls for the particular circumstances faced by each city. It is suggested that this standard for capital - spending needs will be more relevant to administrators and decision-makers who must reconcile capital-stock deterioration with tight budgets.

The empirical work in the paper is a pooled time-series cross-section analysis of aggregate highway spending within ten midwestern urban counties between 1965 and 1976. This aggregated data is shown to be representative of the average city within each county. Finally, actual and needed highway expenditures for each county are presented.

Suggested Citation

Wyckoff, Paul Gary. 1984. “Economic Estimates of Urban Infrastructure Needs.” Federal Reserve Bank of Cleveland, Working Paper No. 84-01.