Explaining the electoral effects of public investments: The case of the expansion of the underground in Madrid, 1995–2007

According to the literature, governments have strong incentives to use the public budget tactically in order to either obtain the electoral support of new voters or strengthen the loyalty of their traditional supporters. Yet vote‐seeking strategies only become rational when voters follow their self‐interest and reward governments when their constituency benefits from public transfers. The literature has focused on the governments' incentives, largely ignoring the importance of knowing whether the electorate is responsive to public investments. This study tests empirically whether incumbents strategically use public investments to gather more electoral support; and whether voters take these investments into account at the polls. These two questions are pursued simultaneously by using as a case study the expansion of the underground network in Madrid, Spain. Only a little evidence is found to support the idea that regional governments constructed new metro stations in neighbourhoods where they had more to gain electorally. Also, the inauguration timing strictly followed the electoral cycle, something that indicates a strategic calculus on the part of the incumbent. However, the models are also consistent with the idea that the government's investments were primarily driven by motives of efficiency. Indeed, although governments are tempted to follow vote‐seeking strategies, they are also aware that they cannot deviate too much from an efficiency‐based allocation of public resources. From the perspective of the voters, robust evidence has been found to show that regional voters rewarded this policy at the neighbourhood level. Neighbourhoods that received new metro stations voted in higher numbers for the incumbent than those quarters without new investments. All in all, these findings may have some implications for normative democratic theory.