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Congestion and residential moving behaviour

  • Larsen, Morten Marott
  • Pilegaard, Ninette
  • Ommeren, Jos Van

In this paper, we study how congestion and residential moving behaviour are interrelated, using a two-region job search model. Workers choose between interregional commuting and residential moving, in order to live closer to their place of work. This choice affects the external costs of commuting, due to congestion. We focus on the equilibrium in which some workers currently living in one region accept jobs in the other, with a fraction of them choosing to commute from their current residence to the new job in the other region and the remainder choosing to move to the region in which the new job is located. The welfare-maximising road tax is derived, which is essentially the Pigouvian tax, given the absence of a tax on moving. Given the presence of moving taxes, which are substantial in Europe, the optimal road tax for commuters is the Pigouvian tax plus the amortised value of the moving tax, evaluated at the first-best equilibrium. As a consequence, the road tax should be higher for commuters than for other travellers. Our numerical example demonstrates that the naive optimal road tax, which ignores the effect of the moving tax, is substantially below the optimal road tax.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 38 (2008)
Issue (Month): 4 (July)
Pages: 378-387

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Handle: RePEc:eee:regeco:v:38:y:2008:i:4:p:378-387
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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  1. Jos Van Ommeren & Joyce Dargay, 2006. "The Optimal Choice of Commuting Speed: Consequences for Commuting Time, Distance and Costs," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 40(2), pages 279-296, May.
  2. M. van Leuvensteijn & P. Koning, 2004. "The Effect of Home-ownership on Labor Mobility in The Netherlands," Working Papers 04-01, Utrecht School of Economics.
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  7. Jos Van Ommeren & Michiel Van Leuvensteijn, 2005. "New Evidence of the Effect of Transaction Costs on Residential Mobility," Journal of Regional Science, Wiley Blackwell, vol. 45(4), pages 681-702.
  8. Parry, Ian & Bento, Antonio, 1999. "Revenue Recycling and the Welfare Effects of Road Pricing," Discussion Papers dp-99-45, Resources For the Future.
  9. Boyce, David & Mattsson, Lars-Göran, 1999. "Modeling residential location choice in relation to housing location and road tolls on congested urban highway networks," Transportation Research Part B: Methodological, Elsevier, vol. 33(8), pages 581-591, November.
  10. Michael Svarer & Michael Rosholm & Jacob Roland Munch, 2003. "Are Home Owners Really more Unemployed?," CAM Working Papers 2003-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  11. Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
  12. White, Michelle J, 1986. "Sex Differences in Urban Commuting Patterns," American Economic Review, American Economic Association, vol. 76(2), pages 368-72, May.
  13. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.
  14. Hamilton, Bruce W, 1982. "Wasteful Commuting," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 1035-51, October.
  15. Svarer, Michael & Rosholm, Michael & Munch, Jakob Roland, 2005. "Rent control and unemployment duration," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2165-2181, December.
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  22. Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental taxes and labor-market distortions," Other publications TiSEM 44d4cfd8-ceb8-432e-9b96-9, Tilburg University, School of Economics and Management.
  23. Bovenberg, A. L. & van der Ploeg, F., 1994. "Environmental policy, public finance and the labour market in a second-best world," Journal of Public Economics, Elsevier, vol. 55(3), pages 349-390, November.
  24. Krol, Robert & Svorny, Shirley, 2005. "The effect of rent control on commute times," Journal of Urban Economics, Elsevier, vol. 58(3), pages 421-436, November.
  25. Jonas Eliasson & Lars-Göran Mattsson, 2001. "Transport and Location Effects of Road Pricing: A Simulation Approach," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(3), pages 417-456, September.
  26. Anas, Alex & Xu, Rong, 1999. "Congestion, Land Use, and Job Dispersion: A General Equilibrium Model," Journal of Urban Economics, Elsevier, vol. 45(3), pages 451-473, May.
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