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Revenue recycling within transport networks

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  • Kidokoro, Yukihiro

Abstract

In this paper, we analyse second-best pricing and investment policy for transport networks with a revenue recycling mechanism in which the toll revenue is used for transport investments or subsidies, as in London's congestion-charging scheme. The results of this paper demonstrate that the way toll revenue is used modifies the usual results significantly, which are typically based on assuming a lump-sum transfer. First, recycling revenue as investment increases the second-best toll when the benefits from the investment exceed the costs and when demand is inelastic with respect to the toll. Recycling revenue as a subsidy has no such effect. Second, "partial" cost-benefit analysis that focuses only on the targeted transport mode would usually lead to erroneous conclusions about whether toll revenues should be used for transport investment, subsidies, or general tax revenues. Thus, "full" cost-benefit analysis, which accounts for changes in consumer and producer surpluses in all transport modes, is necessary.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 68 (2010)
Issue (Month): 1 (July)
Pages: 46-55

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Handle: RePEc:eee:juecon:v:68:y:2010:i:1:p:46-55

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: Congestion tax Revenue recycling Road pricing Transport network Cost-benefit analysis;

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  1. A. Lans Bovenberg & Lawrence H. Goulder, 2001. "Environmental Taxation and Regulation," NBER Working Papers 8458, National Bureau of Economic Research, Inc.
  2. Parry, Ian W.H. & Bento, Antonio Miguel R., 1999. "Revenue recycling and the welfare effects of road pricing," Policy Research Working Paper Series 2253, The World Bank.
  3. Small, Kenneth A., 2001. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt7170x9b0, University of California Transportation Center.
  4. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 1 Investment and the use of tax and toll revenues in the transport sector: The research agenda," Research in Transportation Economics, Elsevier, vol. 19(1), pages 1-26, January.
  5. Proost, Stef & De Borger, Bruno & Koskenoja, Pia, 2007. "Chapter 3 Public finance aspects of transport charging and investments," Research in Transportation Economics, Elsevier, vol. 19(1), pages 59-80, January.
  6. Parry, Ian & Bento, Antonio, 2000. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Discussion Papers dp-00-51, Resources For the Future.
  7. repec:ebl:ecbull:v:18:y:2005:i:1:p:1-6 is not listed on IDEAS
  8. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
  9. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 12 Synthesis of case study results and future prospects," Research in Transportation Economics, Elsevier, vol. 19(1), pages 269-297, January.
  10. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
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Cited by:
  1. De Borger B. & Proost S., 2010. "A political economy model of road pricing," Working Papers 2010014, University of Antwerp, Faculty of Applied Economics.

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