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Revenue recycling within transport networks

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  • Kidokoro, Yukihiro

Abstract

In this paper, we analyse second-best pricing and investment policy for transport networks with a revenue recycling mechanism in which the toll revenue is used for transport investments or subsidies, as in London's congestion-charging scheme. The results of this paper demonstrate that the way toll revenue is used modifies the usual results significantly, which are typically based on assuming a lump-sum transfer. First, recycling revenue as investment increases the second-best toll when the benefits from the investment exceed the costs and when demand is inelastic with respect to the toll. Recycling revenue as a subsidy has no such effect. Second, "partial" cost-benefit analysis that focuses only on the targeted transport mode would usually lead to erroneous conclusions about whether toll revenues should be used for transport investment, subsidies, or general tax revenues. Thus, "full" cost-benefit analysis, which accounts for changes in consumer and producer surpluses in all transport modes, is necessary.

Suggested Citation

  • Kidokoro, Yukihiro, 2010. "Revenue recycling within transport networks," Journal of Urban Economics, Elsevier, vol. 68(1), pages 46-55, July.
  • Handle: RePEc:eee:juecon:v:68:y:2010:i:1:p:46-55
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    References listed on IDEAS

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    1. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
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    3. Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545 Elsevier.
    4. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 12 Synthesis of case study results and future prospects," Research in Transportation Economics, Elsevier, vol. 19(1), pages 269-297, January.
    5. William C. Wheaton, 1978. "Price-Induced Distortions in Urban Highway Investment," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 622-632, Autumn.
    6. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
    7. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 1 Investment and the use of tax and toll revenues in the transport sector: The research agenda," Research in Transportation Economics, Elsevier, vol. 19(1), pages 1-26, January.
    8. Small, Kenneth A., 1992. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt32p9m3mm, University of California Transportation Center.
    9. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 645-671, December.
    10. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
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    Cited by:

    1. François Mirabel & Mathias Reymond, 2011. "The urban toll revenue recycling : what is the optimal share distributed towards mass transit system?," Working Papers hal-01830227, HAL.
    2. repec:eee:juecon:v:102:y:2017:i:c:p:106-122 is not listed on IDEAS
    3. De Borger, Bruno & Proost, Stef, 2012. "A political economy model of road pricing," Journal of Urban Economics, Elsevier, vol. 71(1), pages 79-92.
    4. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2015. "On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city," Journal of Urban Economics, Elsevier, vol. 89(C), pages 32-47.
    5. Lindsey, Robin, 2012. "Road pricing and investment," Economics of Transportation, Elsevier, vol. 1(1), pages 49-63.

    More about this item

    Keywords

    Congestion tax Revenue recycling Road pricing Transport network Cost-benefit analysis;

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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