Congestion pricing, infrastructure investment and redistribution
AbstractWe study congestion pricing by a government that has redistributive concerns, in the presence of optimal income taxation. Individuals differ in (unobservable) earning ability and consumption technology for commodities using a congestible network (e.g. roads, Internet). We find, assuming separable preferences, that when efficiency of consumption technology is either invariant or postively correlated with earning ability, low ability individuals should face higher marginal congestion charges than high ability ones. Moreover, reducing congestion (by raising charges or expanding network capacity) enables government to increase redistribution. We also find that means tested congestion pricing may be necessary to implement the second-best allocation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 28932.
Date of creation: 15 Feb 2011
Date of revision:
congestion pricing; income taxation; redistribution; infrastructure investment;
Find related papers by JEL classification:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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- Mackie-Mason, J.K. & Varian, H.R., 1993.
"Pricing the Internet,"
20/1993, Oslo University, Department of Economics.
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