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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This paper studies the order of magnitude of the pricing corrections that are needed to implement marginal social cost pricing for all transport modes. With the TRENEN model we study this question for 6 areas in the EU. As marginal social cost pricing may generate important surpluses and deficits for the different modes, we also study the effects of two alternative pricing rules that satisfy budget constraints. We examine the effects of average cost pricing that guarantees a budget balance per mode. The second alternative pricing rule we study is social Ramsey pricing (or marginal social cost pricing with a budget constraint) where we impose a budget constraint at the level of the transport sector. We estimate transport effects and welfare effects of the three pricing rules. We show that average pricing rules may actually do worse than the present pricing rules and that social Ramsey pricing may achieve 50% or more of the maximal welfare gain.
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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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