FEDERAL-AID AND RURAL COUNTY HIGHWAY SPENDING - A REVIEW OF THE 1980S

The Reagan/Bush Administrations cut back federal support for state and local governments during the 1980s, causing total real resources available to finance local roads and bridges to increase very slowly between 1977 and 1989. The effect of federal aid on spending for infrastructure has been subject to debate for many years. Some studies have indicated that federal aid is stimulative, while others report tha federal aid substitutes for local resources. This article examines the effect of state and federal aid on county highway spending. The analysis demonstrates that, in 1987, federal aid was stimulative but state aid was not. In light of changes brought about by the Surface Transportation Efficiency Act of 1991 (ISTEA), we can expect federal aid to have a stronger relationship with local highway spending.