Building Sustainable Cities: How Local Investment Drives SDG Performance

This study investigates the impact of local government financial structures on achieving the United Nations Sustainable Development Goals (SDGs) at the municipal level. Using data from 82 Spanish municipalities, we construct a composite index that measures progress across 16 goals, excluding SDG 14, which is not directly relevant at the local scale. Drawing on public capital theory and endogenous growth theory, we hypothesise that investment expenditure is a key driver of sustainable outcomes, while financial dependency plays a supporting role. Our econometric model, estimated through OLS with robust diagnostics, shows that per capita investment expenditure significantly improves SDG performance. In contrast, financial dependency has no significant effect. Among contextual controls, unemployment has a strong negative impact, while other demographic and political factors have limited influence. The findings underscore the important role of investment in promoting municipal sustainability and offer valuable insights for local and international policy agendas.