Bruno De Borger () (Department of Economics, University of Antwerp) Stef Proost () (K.U.Leuven, C.E.S., Energy, Transport and Environment) Kurt Van Dender () (Department of Economics, University of California at Irvine)
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The purpose of this paper is to study tax competition on a parallel road network when different governments have tolling authority on the different links of the network. Reflecting many current situations in Europe, each link is used by both local and transit traffic; moreover, transit has a choice of route. Each government maximises the surplus of local users plus total tax revenues in controlling local and transit transport. Three types of tolling systems are considered: (i) toll discrimination between local traffic and transit, (ii) uniform tolls on local and transit transport, (iii) local tolls only. The results suggest that the welfare effects of introducing transit tolls are large, but that differentiation of tolls between local and transit transport as compared to uniform tolls does not yield large welfare differences. It is also found that the welfare effects of coordination between countries are relatively small in comparison with the welfare gains of tolling transit. The numerical model further illustrates the effects of different transit shares and explicitly considers the role of asymmetries between countries. Higher transit shares strongly raise the Nash equilibrium transit toll and slightly decrease local tolls. With asymmetric demands, the welfare gains of introducing differentiated tolling rise strongly for the country with lower local demand.
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Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
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