Discussion Paper Details

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Title: Fixing Swiss Potholes: The Importance of Improvements

Author(s): Michael Dueker and Andreas M Fischer

Publication Date: January 2002

Keyword(s): capital utilization, improvements and maintenance and repair

Programme Area(s): International Macroeconomics and Public Economics

Abstract: The objective of this note is to document the importance of improvements relative to the other forms of capital spending and to determine whether improvements have similar cyclical properties as maintenance and repair. To shed some light on these issues, we look at a unique data set on Swiss road spending. The data on road spending are broken down into new roads, road improvements, and road maintenance and repair (hereafter road maintenance). The long-run evidence finds that road improvement is larger in size than road maintenance and exhibits similar dynamic properties as road maintenance. This result strengthens the view of McGratten and Schmitz (1999) that countercyclical spending of firms on maintenance (and on improvement) of existing capital is too large to be ignored.

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Bibliographic Reference

Dueker, M and Fischer, A. 2002. 'Fixing Swiss Potholes: The Importance of Improvements'. London, Centre for Economic Policy Research.