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Marginal Social Cost Pricing on a Transportation Network: Comparison of Second-Best Policies

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  • Safirova, Elena A.

    (Resources for the Future)

  • Houde, Sébastien
  • Harrington, Winston

Abstract

In this paper we evaluate and compare long-run economic effects of six road-pricing schemes aimed at internalizing social costs of transportation. In order to conduct this analysis, we employ a spatially disaggregated general equilibrium model of a regional economy that incorporates decisions of residents, firms, and developers, integrated with a spatially-disaggregated strategic transportation planning model that features mode, time period, and route choice. The model is calibrated to the greater Washington, DC metropolitan area. We compare two social cost functions - one restricted to congestion alone and another that accounts for other external effects of transportation. We find that when the ultimate policy goal is a reduction in the complete set of motor vehicle externalities, cordon-like policies and variable-toll policies lose some attractiveness compared to policies based primarily on mileage. We also find that full social cost pricing requires very high toll levels and therefore is bound to be controversial.

Suggested Citation

  • Safirova, Elena A. & Houde, Sébastien & Harrington, Winston, 2008. "Marginal Social Cost Pricing on a Transportation Network: Comparison of Second-Best Policies," RFF Working Paper Series dp-07-52, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-07-52
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-07-52.pdf
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    References listed on IDEAS

    as
    1. Small, K.A. & Kazimi, C., 1994. "On the Costs of Air Pollution from Motor Vehicules," Papers 94-95-3, California Irvine - School of Social Sciences.
    2. Proost, Stef & Van Dender, Kurt, 2004. "7. Marginal Social Cost Pricing For All Transport Modes And The Effects Of Modal Budget Constraints," Research in Transportation Economics, Elsevier, vol. 9(1), pages 159-177, January.
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    4. Safirova, Elena & Gillingham, Kenneth & Houde, Sébastien, 2007. "Measuring marginal congestion costs of urban transportation: Do networks matter?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(8), pages 734-749, October.
    5. Anas, Alex & Rhee, Hyok-Joo, 2006. "Curbing excess sprawl with congestion tolls and urban boundaries," Regional Science and Urban Economics, Elsevier, vol. 36(4), pages 510-541, July.
    6. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    7. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    8. Santos, G. & Rojey, L. & Newbery, D.M., 2000. "The Environmental Benefits from Road Pricing," Cambridge Working Papers in Economics 0020, Faculty of Economics, University of Cambridge.
    9. Safirova, Elena A. & Houde, Sébastien & Lipman, D. Abram & Harrington, Winston & Bagliano, Andrew D., 2006. "Congestion Pricing: Long-Term Economic and Land-Use Effects," RFF Working Paper Series dp-06-37, Resources for the Future.
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    Cited by:

    1. John Stanley & David Hensher, 2009. "Urban Transport in Australia: Has It Reached Breaking Point?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(2), pages 190-200, June.
    2. Parry, Ian W.H. & Timilsina, Govinda R., 2010. "How should passenger travel in Mexico City be priced?," Journal of Urban Economics, Elsevier, vol. 68(2), pages 167-182, September.

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    More about this item

    Keywords

    traffic congestion; social cost pricing; land use; welfare analysis; road pricing; general equilibrium; simulation; Washington DC;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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