IEAS Working Paper No. 26-A004, September 2026

Abstract:
Recurrent O&M spending on infrastructure capital raises output by increasing demand and
supporting infrastructure services, but it also adds to the costs of infrastructure provision. These
costs are sizable: for U.S. public transportation and water infrastructure, O&M spending has
exceeded capital investment each year since 1977. Conventional multiplier measures, which
count only investment outlays as fiscal costs, can therefore overstate infrastructure multipliers.
Across a reasonable range of O&M intensities, model simulations show that long-run full-cost
output multipliers are 30–65 percent lower than their conventional counterparts. Empirical
estimates likewise show nontrivial reductions when recurrent costs are included.