Should Urban Transit Subsidies Be Reduced?
This paper derives empirically tractable formulas for the welfare effects of fare adjustments in passenger peak and off-peak rail and bus transit, and for optimal pricing of those services. The formulas account for congestion, pollution, accident externalities, scale economies, and agency adjustment of transit service offerings. We apply them using parameter values for Washington (DC), Los Angeles, and London. The results support the efficiency of the large current fare subsidies; even starting with fares at 50 percent of operating costs, incremental fare reductions are welfare improving in almost all cases. These findings are robust to alternative assumptions and parameters. (JEL L92, R41, R42, R48)
Volume (Year): 99 (2009)
Issue (Month): 3 (June)
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- Nelson, Peter & Baglino, Andrew & Harrington, Winston & Safirova, Elena & Lipman, Abram, 2007.
"Transit in Washington, DC: Current benefits and optimal level of provision,"
Journal of Urban Economics,
Elsevier, vol. 62(2), pages 231-251, September.
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- Glaister, Stephen & Lewis, Davis, 1978. "An integrated fares policy for transport in London," Journal of Public Economics, Elsevier, vol. 9(3), pages 341-355, June.
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- Kraus, Marvin, 1991. "Discomfort externalities and marginal cost transit fares," Journal of Urban Economics, Elsevier, vol. 29(2), pages 249-259, March. Full references (including those not matched with items on IDEAS)
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