2023 Volume 79 Issue 11 Article ID: 23-00030
When public agencies design road maintenance policies, if the maintenance cost has a large share of the budget, it is necessary to reduce the expenditures for other items, which decrease the benefits of the other items. These additional costs due to an increase in the public expenditure are called the marginal cost of public funds (MCF). Our study explicitly considers the endogenous MCF, and optimizes the long-term maintenance policy dynamically. Our numerical simulations show that 1）when MCF is low, the ratio of maintenance at condition II is high; when MCF is high, maintenance only at condition III is the optimal policy, 2） when the time discount rate is high, maintenance only at condition III is optimal; when the time discount rate is low, maintenance both at conditions II and III is optimal, 3）when the ratio of degraded bridges is high, maintenance at early stages is necessary. So, the lifetime utility in a future generation is higher than that in the current generation, and 4) the optimal maintenance polity based on the life cycle cost minimization is different than that at MCF>1, so that that policy can yield a large welfare loss.
