The allocation of transport infrastructure in Swedish municipalities: welfare maximization, political economy or both?

The choice of transport infrastructure projects to include in the National Transport Infrastructure Plans in Sweden is often said to be motivated by the weighing of cost against social benefits. Examining the projects that are included in the Plans, it is clear, however, that not all projects have positive net present values, and are therefore more costly to build than the benefits they create. This paper studies alternative models that might explain the choice of projects. Two political economy models, the district demand and the swing voter with lobbying, are tested, and a model that accounts for the spatial distribution of the projects, as well as the possibility that priorities are based on welfare concerns, is estimated. No support is found for the political economy models. What explains investment volume is the existence of CBA results for a project, which may indicate that welfare benefits have an impact, as do the spatial spillovers from a project’s benefits and lobbying, especially by the municipalities concerned.