Public infrastructure spending on maintenance projects has a greater impact on economic growth and equitable wealth distribution than spending on new investments, according to Georgia State University research.

In “Public Infrastructure Maintenance and the Distribution of Wealth,” (Economic Inquiry, 2017), economists John Gibson and Felix Rioja of the Andrew Young School of Policy Studies examined the impact of infrastructure maintenance spending on economic output and wealth distribution. For their model they used Mexico, an emerging market where the level of infrastructure is average for Latin American countries while its income per capita ranks among the top third in that region.

“Poor infrastructure networks—whether roads, railways, airports, water systems or power utilities—are rated globally among the greatest barriers to doing business,” said Gibson, an assistant professor of economics. “Insufficient spending can lead to deterioration and a reduction in services, which will increase both transportation and production costs.”

Several prior studies have shown public infrastructure investment positively affects growth. Rioja’s earlier studies also found that spending more on maintenance rather than new infrastructure can have a larger positive impact on economic output. Yet no earlier study had analyzed how various policies may influence the distribution of wealth and degree of inequality present in the economy.

“Governments often neglect maintenance in favor of building new infrastructure,” said Gibson. “Our first key finding shows that spending more on maintenance rather than on new investment can increase aggregate Gross Domestic Product and foster the more equitable distribution of wealth. Poorer households that experience an increase in infrastructure services increase their savings at a comparatively higher rate than do richer households.”

They also found that spending more on maintenance rather than new investment yielded the highest improvements to overall output, income and wealth.

“Policymakers need to pay much more attention to maintenance within their spending priorities,” the economists conclude.