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Can we decentralize transport taxes and infrastructure supply?

Listed author(s):
  • Fung, Chau Man
  • Proost, Stef

This paper studies analytically a tax reform where federal gasoline and car taxes are replaced by tolls decided by local authorities. This is particularly relevant in countries with high gasoline taxes like the EU or countries that introduce gasoline taxes like China. One of the major barriers in the reform is the allocation of revenues: when the goal of the federal government is to keep the gasoline tax revenue constant, a vertical tax conflict reduces the efficiency gains of the new instruments. Another barrier is the presence of spillovers: it elicits tax-exporting behavior by regional governments and the high taxes overly discourage traffic. We find the efficiency loss of the first barrier to be small and spillover inefficiency to be larger. When infrastructure capacity is flexible, the spillover inefficiency tends to be larger if pricing and capacity decisions are decentralized and smaller if only pricing or capacity decisions are decentralized.

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File URL: http://www.sciencedirect.com/science/article/pii/S2212012216300223
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Article provided by Elsevier in its journal Economics of Transportation.

Volume (Year): 9 (2017)
Issue (Month): C ()
Pages: 1-19

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Handle: RePEc:eee:ecotra:v:9:y:2017:i:c:p:1-19
DOI: 10.1016/j.ecotra.2016.10.003
Contact details of provider: Web page: http://www.elsevier.com/locate/ecotra

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  1. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
  2. De Borger, B. & Dunkerley, F. & Proost, S., 2007. "Strategic investment and pricing decisions in a congested transport corridor," Journal of Urban Economics, Elsevier, vol. 62(2), pages 294-316, September.
  3. De Borger, Bruno & Proost, Stef, 2015. "The political economy of public transport pricing and supply decisions," Economics of Transportation, Elsevier, vol. 4(1), pages 95-109.
  4. Mandell, Svante & Proost, Stef, 2016. "Why truck distance taxes are contagious and drive fuel taxes to the bottom," Journal of Urban Economics, Elsevier, vol. 93(C), pages 1-17.
  5. Bruno Borger & Stef Proost, 2016. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 934-959, October.
  6. Grahn-Voorneveld, Sofia, 2013. "The effects of decentralized capacity decisions for congested self-financed roads," Transportation Research Part A: Policy and Practice, Elsevier, vol. 56(C), pages 49-60.
  7. Santos, Georgina & Li, Wai Wing & Koh, Winston T.H, 2004. "9. Transport Policies In Singapore," Research in Transportation Economics, Elsevier, vol. 9(1), pages 209-235, January.
  8. Proost, Stef & Sen, Ahksaya, 2006. "Urban transport pricing reform with two levels of government: A case study of Brussels," Transport Policy, Elsevier, vol. 13(2), pages 127-139, March.
  9. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
  10. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
  11. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990. "Economics of a bottleneck," Journal of Urban Economics, Elsevier, vol. 27(1), pages 111-130, January.
  12. Jan K. Brueckner, 2015. "Decentralized Road Investment and Pricing in a Congested, Multi-Jurisdictional City: Efficiency With Spillovers," National Tax Journal, National Tax Association, vol. 68(3S), pages 839-854, September.
  13. de Palma, André & Lindsey, Robin, 2006. "Modelling and evaluation of road pricing in Paris," Transport Policy, Elsevier, vol. 13(2), pages 115-126, March.
  14. Knight, Brian, 2004. "Parochial interests and the centralized provision of local public goods: evidence from congressional voting on transportation projects," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 845-866, March.
  15. Mayeres, Inge & Proost, Stef, 2013. "The taxation of diesel cars in Belgium – revisited," Energy Policy, Elsevier, vol. 54(C), pages 33-41.
  16. Alex Anas & Robin Lindsey, 2011. "Reducing Urban Road Transportation Externalities: Road Pricing in Theory and in Practice," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 66-88, Winter.
  17. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
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