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.

We acknowledge financial support from the Taubman Center for State and Local Government, the European Research Council under the European Union's Horizon 2020 research and innovation program (grant agreement n. 714905), the Spanish Ministry of Economy and Competitiveness (grants RYC-2013-13838 and SEV-2015-0563), and the Government of Catalonia (CERCA program and grant 2014 SGR 830).