Political economics offers several explanations for the preferences that guide the provision of public services. In this paper, we examine three of these. The district demand model starts by noting that spending on public goods, here transport infrastructure, provides benefits that primarily are geographically concentrated, while costs are paid by taxpayers at large. This separation between the benefits and costs of projects may create an incentive for political parties to increase spending in electoral districts or municipalities that predominately vote for them. Since each district pays only a small share of the associated costs, but enjoys most of the benefits, new infrastructure may be seen as a prize won by the political majority for their constituency. In addition, and in order to avoid overspending, parties have reason to restrain spending in other districts.
The objective of the study is to suggest the allocation of transport infrastructure in Swedish municipalities.
The results in this study indicate that the allocation of transport infrastructure funds in Sweden can be explained with three factors:
- the existence of a CBA, which may, but does not necessarily, indicate considerations of social welfare,
- the spill over effects from investment in one municipality on its neighbours, and municipality lobbying measured by the presence of co-financing.
The two political economic models relating to “vote buying”, namely the district demand and the swing voter models, have to be rejected, however. Hence, a municipality’s tax share, the voters’ strength of party attachment, and an electoral district’s cut point density cannot be used to explain the investment decisions. The number of large firms in a municipality is a borderline significant explanation for road investment in only one of the Plans. An additional variable with explanatory power is the share of rail investments out of the total stock of investments – rail investment may be preferred over road investment, but the choice of rail projects is influenced to a lesser degree by the societal benefits arising from these investments. The explanation for preferring rail over road is probably the ‘warm glow’ effect on politicians investing in a transport mode considered environmentally friendly