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Should subsidies to urban passenger transport be increased? A spatial CGE analysis for a German metropolitan area

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  • Tscharaktschiew, Stefan
  • Hirte, Georg

Abstract

In many countries passenger transport is significantly subsidized in a variety of ways for various reasons. The objective of this paper is to examine efficiency, distributional, environmental (CO2emissions) and spatial effects of increasing different kinds of passenger transport subsidies discriminating between household types, travel purposes and travel modes. The effects are calculated by applying a numerical spatial general equilibrium approach calibrated to an average German metropolitan area. In extension to most studies focusing on only one kind of subsidy, we compare the effects of different transport subsidies within the same unified framework that allows to account for two features not yet considered simultaneously in studies on transport subsidies: endogenous labor supply and location decisions. Furthermore, congestion, travel mode choice, travel related CO2 emissions and institutional details regarding the tax system in Germany are taken into account. The results suggest that optimal subsidy levels are either small or even zero. While subsidizing public transport is welfare enhancing, subsidies to urban road traffic reduce aggregate urban welfare. Concerning the latter it is shown that making investments in urban road infrastructure capacity or reducing gasoline taxes may even be harmful to residents using predominantly automobile. In contrast, pure commuting subsidies hardly affect aggregate urban welfare, but distributional effects are substantial. All policies cause suburbanization of city residents and (except for subsidizing public transport) contribute to urban sprawl by raising the spatial imbalance of residences and jobs but the effect is relatively small. In addition, the policies induce a very differentiated pattern regarding distributional effects, benefits of landowners and environmental effects.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

Volume (Year): 46 (2012)
Issue (Month): 2 ()
Pages: 285-309

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Handle: RePEc:eee:transa:v:46:y:2012:i:2:p:285-309

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Keywords: Urban general equilibrium model; Transport policy; Transport subsidy; Commuting subsidy;

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Citations

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Cited by:
  1. Hirte, Georg & Tscharaktschiew, Stefan, 2011. "Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities," Dresden Discussion Paper Series in Economics 02/11, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Evangelinos, Christos, 2013. "Interessengruppen und Preissetzung im Verkehr," Discussion Papers 2/2013, Dresden University of Technology, Faculty of Transportation and Traffic Sciences "Friedrich List", Institute for Transport and Economics.
  3. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "Income tax deduction of commuting expenses in an urban CGE study: The case of German cities," Transport Policy, Elsevier, vol. 28(C), pages 11-27.
  4. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "The optimal subsidy on electric vehicles in German metropolitan areas: A spatial general equilibrium analysis," Energy Economics, Elsevier, vol. 40(C), pages 515-528.
  5. Nitzsche, Eric & Tscharaktschiew, Stefan, 2013. "Efficiency of speed limits in cities: A spatial computable general equilibrium assessment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 56(C), pages 23-48.

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