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Behaviors and housing inertia are key factors in determining the consequences of a shock in transportation costs

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  • Gusdorf, Francois
  • Hallegatte, Stephane

Abstract

This paper investigates the consequences of a sudden increase in transportation costs when households behaviors and buildings inertia are accounted for. A theoretical framework is proposed, capturing the interactions between behaviors, transportation costs and urban structure. It is found that changes in households consumption and housing choices reduce significantly the long-term adverse effects of a shock in transportation costs. Indeed, the shock translates, over the long-run, into a more concentrated housing that limits households utility losses and maintains landowners' income. But, because of buildings inertia, the shock leads first to a long transition, during which the adjustment is constrained by a suboptimal housing-supply structure. Then, households support larger losses than in the final stage, though lower than with no adjustment at all, and landowners experience a large decrease in their aggregate income and an important redistribution of wealth. Negative transitional effects grow as the shock becomes larger. Thus, behaviors and buildings inertia are key factors in determining the vulnerability to transportation price variability and to the introduction of climate policies. Our policy conclusions are that: (i) if a long-term increase in transportation costs is unavoidable because of climate change or resource scarcity, a smooth change, starting as early as possible, must be favored; and (ii) fast-growing cities of the developing world can reduce their future vulnerability to shocks in transportation costs through the implementation of policies that limit urban sprawl.
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  • Gusdorf, Francois & Hallegatte, Stephane, 2007. "Behaviors and housing inertia are key factors in determining the consequences of a shock in transportation costs," Energy Policy, Elsevier, vol. 35(6), pages 3483-3495, June.
  • Handle: RePEc:eee:enepol:v:35:y:2007:i:6:p:3483-3495
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    Cited by:

    1. Strand, Jon & Miller, Sebastian & Siddiqui, Sauleh, 2011. "Infrastructure investments under uncertainty with the possibility of retrofit : theory and simulations," Policy Research Working Paper Series 5516, The World Bank.
    2. Gusdorf, Francois & Hallegatte, Stephane, 2007. "Compact or spread-out cities: Urban planning, taxation, and the vulnerability to transportation shocks," Energy Policy, Elsevier, vol. 35(10), pages 4826-4838, October.
    3. Francois Gusdorf & Stéphane Hallegatte & Alain Lahellec, 2007. "Time and space matter: how urban transitions create inequality," CIRED Working Papers hal-00522404, HAL.
    4. Strand, Jon & Miller, Sebastian & Siddiqui, Sauleh, 2014. "Long-run carbon emission implications of energy-intensive infrastructure investments with a retrofit option," Energy Economics, Elsevier, vol. 46(C), pages 308-317.
    5. Ming-Chu Chiang & I-Chun Tsai, 2016. "Ripple effect and contagious effect in the US regional housing markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 55-82, January.
    6. Vincent Viguie & Stéphane Hallegatte & Julie Rozenberg, 2014. "Downscaling long term socio-economic scenarios at city scale: A case study on Paris," Post-Print hal-01136217, HAL.
    7. Francois Gusdorf & Stéphane Hallegatte & Alain Lahellec, 2007. "Time and space matter: how urban transitions create inequality," Working Papers hal-00522404, HAL.
    8. Viguié, Vincent & Hallegatte, Stéphane & Rozenberg, Julie, 2014. "Downscaling long term socio-economic scenarios at city scale: A case study on Paris," Technological Forecasting and Social Change, Elsevier, vol. 87(C), pages 305-324.

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