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Welfare Analysis of Informal Transit Services in Brazil and the Effects of Regulation

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  • Golub, Aaron David
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    Abstract

    In Brazil, the recent explosion of informal transport activity is having profound effects on formal, regulated transport systems and is the source of great controversy in the urban passenger transportation arena. A variety of policies are being proposed to manage what has been an uncontrolled growth of the sector. This study seeks to understand the advantages these systems have for users who choose them, and how proposed policies will impact these benefits. A corridor in Rio de Janeiro with substantial informal activity was used as a case study and field trips were made to gather basic data and perform travel surveys. Standard measures of welfare changes in a discrete choice framework were used to measure the proposed policies’ welfare impacts on users. Eleven candidate policies were evaluated, ranging from the eradication of the informal modes and investment in formal modes, to the legalization and regulation of the informal modes. Benefits were compared with costs to discuss policies’ efficiencies, and the distribution of benefits across income classes was explored. Net benefits from some policies were found to be substantial, on the order of hundreds of dollars per year per commuter, a significant share of the typical yearly earning of 2000 dollars (US). Legalizing the informal sector was found to benefit users only slightly but further investments in the sector are probably inefficient. Users benefited most from improvements in formal mass transit modes (trains and buses), on the order of 50 to 100 dollars per commuter per year. Finally, policies to foster a competitive environment for the delivery of both informal and formal services was shown to benefit users, on the order of 50 dollars per commuter per year. These best policies are discussed in light of current and past management practices in the sector. High costs of investments, an environment resistant to and unfamiliar with open and competitive bidding for concessions, and difficulties in the enforcement of regulations will threaten the successful implementation of these policies.

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    Bibliographic Info

    Paper provided by University of California Transportation Center in its series University of California Transportation Center, Working Papers with number qt0pf40632.

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    Date of creation: 01 Jan 2003
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    Handle: RePEc:cdl:uctcwp:qt0pf40632

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    Keywords: Social and Behavioral Sciences;

    References

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    1. E A Vasconcellos, 1997. "The making of the middle-class city: transportation policy in Sao Paulo," Environment and Planning A, Pion Ltd, London, vol. 29(2), pages 293-310, February.
    2. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-30, January.
    3. Anders Karlstrom, 2003. "A Simple Method of Incorporating Income Effects into Logit and Nested-Logit Models: Theory and Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 248-253.
    4. Jara-Díaz, Sergio R. & Videla, Jorge, 1989. "Detection of income effect in mode choice: Theory and application," Transportation Research Part B: Methodological, Elsevier, vol. 23(6), pages 393-400, December.
    5. Bhat, Chandra R., 1998. "Accommodating variations in responsiveness to level-of-service measures in travel mode choice modeling," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(7), pages 495-507, September.
    6. Niskanen, Esko, 1987. "Congestion tolls and consumer welfare," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 171-174, April.
    7. Small, Kenneth A., 1983. "The incidence of congestion tolls on urban highways," Journal of Urban Economics, Elsevier, vol. 13(1), pages 90-111, January.
    8. Jara-Díaz, Sergio R. & Farah, Marcelo, 1987. "Transport demand and users' benefits with fixed income: The goods/leisure trade off revisited," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 165-170, April.
    9. K. M. Gwilliam, 2001. "Competition in Urban Passenger Transport in the Developing World," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(1), pages 99-118, January.
    10. Swait, Joffre & Ben-Akiva, Moshe, 1987. "Empirical test of a constrained choice discrete model: Mode choice in São Paulo, Brazil," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 103-115, April.
    11. Gaudry, Marc J. I. & Jara-Diaz, Sergio R. & Ortuzar, Juan de Dios, 1989. "Value of time sensitivity to model specification," Transportation Research Part B: Methodological, Elsevier, vol. 23(2), pages 151-158, April.
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    Cited by:
    1. Cervero, Robert & Golub, Aaron, 2007. "Informal transport: A global perspective," Transport Policy, Elsevier, vol. 14(6), pages 445-457, November.
    2. Aaron Golub & Ronaldo Balassiano & Ayres Araújo & Eric Ferreira, 2009. "Regulation of the informal transport sector in Rio de Janeiro, Brazil: welfare impacts and policy analysis," Transportation, Springer, vol. 36(5), pages 601-616, September.

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