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Congestion and residential moving behaviour

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Author Info
Larsen, Morten Marott
Pilegaard, Ninette
Ommeren, Jos Van

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Abstract

In this paper, we study how congestion and residential moving behaviour are interrelated, using a two-region job search model. Workers choose between interregional commuting and residential moving, in order to live closer to their place of work. This choice affects the external costs of commuting, due to congestion. We focus on the equilibrium in which some workers currently living in one region accept jobs in the other, with a fraction of them choosing to commute from their current residence to the new job in the other region and the remainder choosing to move to the region in which the new job is located. The welfare-maximising road tax is derived, which is essentially the Pigouvian tax, given the absence of a tax on moving. Given the presence of moving taxes, which are substantial in Europe, the optimal road tax for commuters is the Pigouvian tax plus the amortised value of the moving tax, evaluated at the first-best equilibrium. As a consequence, the road tax should be higher for commuters than for other travellers. Our numerical example demonstrates that the naive optimal road tax, which ignores the effect of the moving tax, is substantially below the optimal road tax.

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Publisher Info
Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 38 (2008)
Issue (Month): 4 (July)
Pages: 378-387
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Handle: RePEc:eee:regeco:v:38:y:2008:i:4:p:378-387

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  1. Small, Kenneth A & Song, Shunfeng, 1992. ""Wasteful" Commuting: A Resolution," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 888-98, August. [Downloadable!] (restricted)
  2. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September. [Downloadable!] (restricted)
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  3. Hamilton, Bruce W, 1982. "Wasteful Commuting," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 1035-51, October. [Downloadable!] (restricted)
  4. Lans Bovenberg, A. & de Mooij, Ruud A., 1994. "Environmental taxes and labor-market distortions," European Journal of Political Economy, Elsevier, vol. 10(4), pages 655-683, December. [Downloadable!] (restricted)
  5. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-89, September. [Downloadable!] (restricted)
  6. White, Michelle J, 1988. "Urban Commuting Journeys Are Not "Wasteful."," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 1097-110, October. [Downloadable!] (restricted)
  7. Jonas Eliasson & Lars-Göran Mattsson, 2001. "Transport and Location Effects of Road Pricing: A Simulation Approach," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(3), pages 417-456, September. [Downloadable!] (restricted)
  8. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(4), pages 645-71, December. [Downloadable!] (restricted)
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  9. White, M.J., 1988. "Urban Commuting Journeys Are Not Wasteful," Papers 88-10, Michigan - Center for Research on Economic & Social Theory.
  10. Bovenberg, A Lans & van der Ploeg, Frederick, 1992. "Environmental Policy, Public Finance and the Labour Market in a Second-best World," CEPR Discussion Papers 745, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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