A political economy model of road pricing
AbstractIn this paper, we take a political economy approach to study the introduction of urban congestion tolls, using a simple majority voting model. Making users pay for external congestion costs is for an economist an obvious reform, but successful introductions of externality pricing in transport are rare. The two exceptions are London and Stockholm that are characterized by two salient facts. First, the toll revenues were tied to improvements of public transport. Second, although a majority was against road pricing before it was actually introduced, a majority was in favor of the policy reform after its introduction. This paper constructs a model to explain these two aspects. Using a stylized model with car and public transport, we show that it is easier to obtain a majority when the toll revenues are used to subsidize public transport than when they are used for a tax refund. Furthermore, introducing idiosyncratic uncertainty for car substitution costs, we can explain the presence of a majority that is ex ante against road pricing and ex post in favor. The ex ante majority against road pricing also implies that there is no majority for organizing an experiment that would take away the individual uncertainty.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces10.20.
Date of creation: Jun 2010
Date of revision:
Other versions of this item:
- De Borger, Bruno & Proost, Stef, 2012. "A political economy model of road pricing," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/323859, Katholieke Universiteit Leuven.
- De Borger B. & Proost S., 2010. "A political economy model of road pricing," Working Papers 2010014, University of Antwerp, Faculty of Applied Economics.
- De Borger, Bruno & Proost, Stef, 2010. "A political economy model of road pricing," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/270490, Katholieke Universiteit Leuven.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government Pricing and Policy
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-POL-2010-12-23 (Positive Political Economics)
- NEP-URE-2010-12-23 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, vol. 93(1), pages 256-264, March.
- Dunkerley, Fay & Glazer, Amihai & Proost, Stef, 2010.
"What drives gasoline taxes?,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/260622, Katholieke Universiteit Leuven.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Why road pricing is so difficult to impose
by Economic Logician in Economic Logic on 2010-08-24 14:14:00
- De Borger, Bruno & Proost, Stef, 2012.
"Transport policy competition between governments: a selective survey of the literature,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/367099, Katholieke Universiteit Leuven.
- De Borger B. & Proost S., 2012. "Transport policy competition between governments: A selective survey of the literature," Working Papers 2012014, University of Antwerp, Faculty of Applied Economics.
- Russo, Antonio, 2012. "Voting on Road Congestion Policy," TSE Working Papers 12-310, Toulouse School of Economics (TSE), revised Nov 2012.
- Mogens Fosgerau & André De Palma, 2012. "The dynamics of urban traffic congestion and the price of parking," Working Papers hal-00742104, HAL.
- Westin , Jonas & Basck, Pierre & Franklin, Joel P. & Proost , Stef & Raux , Charles, 2012. "Achieving political acceptability for new transport infrastructure in congested urban regions," Working papers in Transport Economics 2012:19, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
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