DP12207 The Political Economy of Transportation Investment

Author(s): Edward L Glaeser, Giacomo AM Ponzetto
Publication Date: August 2017
Keyword(s): elections, imperfect information, infrastructure, Nuisance mitigation, political economy, Transportation investment
JEL(s): D72, D82, H54, H76, R42, R53
Programme Areas: Public Economics, International Trade and Regional Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12207

Will politics lead to over-building or under-building of transportation projects? In this paper, we develop a model of infrastructure policy in which politicians overdo things that have hidden costs and underperform tasks whose costs voters readily perceive. Consequently, national funding of transportation leads to overspending, since voters more readily perceive the upside of new projects than the future taxes that will be paid for distant highways. Yet when local voters are well-informed, the highly salient nuisances of local construction, including land taking and noise, lead to under-building. This framework explains the decline of urban mega-projects in the US (Altshuler and Luberoff 2003) as the result of increasingly educated and organized urban voters. Our framework also predicts more per capita transportation spending in low-density and less educated areas, which seems to be empirically correct.