Fiscal relations and intergovernmental competition in transport infrastructure maintenance: A stochastic evolutionary game model

Abstract

Chinese-style fiscal decentralization has led local governments to prioritize transport infrastructure construction while paying insufficient attention to maintenance. This study develops a stochastic evolutionary game model involving the central government, two competing local governments, and private firms, and combines it with numerical simulations based on the Chinese context. The aim is to uncover the dynamic interactions among fiscal relations, intergovernmental competition, and market feedback, thereby identifying an optimal fiscal arrangement for improving transport infrastructure maintenance. The results show that, first, in regions where firms enjoy higher returns and market activity is strong, a decentralized system is more effective in stimulating local initiative. By contrast, in regions with weak market feedback, a more centralized arrangement is needed to strengthen central supervision. Second, compared with the free-rider incentives generated by spatial spillovers, local governments are more concerned with whether maintenance inputs can be translated into capital agglomeration and tax growth. Third, high-quality maintenance attracts business investment by reducing operating costs, while increased investment reinforces governments' incentives to invest in maintenance through higher tax revenues. This study provides both a theoretical basis and policy implications for optimizing the allocation of fiscal powers and responsibilities in the transport sector.