This dissertation consists of two chapters studying how contract design and political economy shape transportation and environmental policy outcomes in the United States and Latin America. The first chapter studies how public transit contracts should be designed to maximize welfare when private operators face two opposing market failures: market power, which leads firms to set high prices and underprovide service quality, and uninternalized network effects that arise from fragmented operations and lack of coordination across routes. Governments address these distortions through contracts combining quality targets with route bundling. I exploit quasi-experimental variation from Santiago, Chile's 2022 contract reform, which imposed stricter monitoring standards and rebundled routes among private operators. Using high-frequency GPS data for 373 bus routes and a difference-in-differences design, I find that stricter quality targets improve service regularity by 16 percent and increase ridership by 11 percent. I develop and estimate a structural model that endogenizes traveler mode and route choices, operators' service attribute decisions, and road congestion to evaluate alternative contract designs. The results show that effective contract design must reconcile the efficiency gains from competition with the coordination benefits of network integration, and that jointly optimizing quality targets and route bundling can bring market outcomes substantially closer to the social planner's benchmark. The second chapter, joint with Gian-Claudia Sciara and Andrew R. Waxman, provides the first empirical estimates of the electoral consequences of motor fuel taxation. Despite widespread concern about the political infeasibility of environmental taxes, direct evidence has been scarce. We compile a comprehensive dataset on state legislative election outcomes and gasoline taxes over 1982–2016 and apply a difference-in-discontinuities design that compares incumbency advantages in close elections across states with and without gasoline tax increases. We find that gas tax increases reduce the incumbency advantage by 1.3 percentage points for Republicans and 1.9 percentage points for Democrats — representing 14 to 21 percent of the overall incumbency advantage in our sample. These penalties help explain the persistent underpricing of motor fuel externalities and have direct implications for the political feasibility of carbon pricing more broadly.