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Commuting, congestion tolls and the structure of the labour market: Optimal congestion pricing in a wage bargaining model

  • De Borger, Bruno

In this paper we study optimal congestion pricing in a wage bargaining model. We first show that, compared to a competitive labour market environment, wage bargaining may lead to substantially different optimal transport taxes. Second, bargaining implies that exogenous increases in congestion levels and in transport taxes raise negotiated wages and reduce employment levels; the strength of these effects depends on the union's attitude towards transport issues. Third, we show that the optimal uniform transport tax positively depends on the impact of congestion on negotiated wages, and negatively on the wage effects of the congestion tax itself. Using a standard specification for union preferences, the optimal transport tax exceeds the marginal external congestion cost to the extent that transport flows include demand by people who have no employment. Finally, if taxes can be differentiated according to trip purpose, the tax structure implies shifting the tax burden away from the employed.

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

Volume (Year): 39 (2009)
Issue (Month): 4 (July)
Pages: 434-448

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Handle: RePEc:eee:regeco:v:39:y:2009:i:4:p:434-448
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  1. Erik T. Verhoef, 2004. "Second-best Congestion Pricing Schemes in the Monocentric City," Tinbergen Institute Discussion Papers 04-110/3, Tinbergen Institute.
  2. Parry, Ian W.H. & Bento, Antonio Miguel R., 1999. "Revenue recycling and the welfare effects of road pricing," Policy Research Working Paper Series 2253, The World Bank.
  3. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-79, June.
  4. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  5. Rainald Borck & Matthias Wrede, 2004. "Political Economy of Commuting Subsidies," Discussion Papers of DIW Berlin 445, DIW Berlin, German Institute for Economic Research.
  6. DE BORGER, Bruno, . "Commuting, congestion tolls and noncompetitive labour markets: Optimal congestion pricing in a wage bargaining model," Working Papers 2006014, University of Antwerp, Faculty of Applied Economics.
  7. Holmlund, Bertil & Kolm, Ann-Sofie, 1998. "Environmental Tax Reform in a Small Open Economy with Structural Unemployment," Working Paper Series 1997:2, Uppsala University, Department of Economics.
  8. Van Ommeren, Jos & Rietveld, Piet, 2005. "The commuting time paradox," Journal of Urban Economics, Elsevier, vol. 58(3), pages 437-454, November.
  9. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
  10. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
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  13. Koskela, Erkki & Schöb, Ronnie & Sinn, Hans-Werner, 1998. "Pollution, Factor Taxation and Unemployment," Munich Reprints in Economics 19493, University of Munich, Department of Economics.
  14. Zhang, Xiaoning & Huang, Hai-Jun & Zhang, H.M., 2008. "Integrated daily commuting patterns and optimal road tolls and parking fees in a linear city," Transportation Research Part B: Methodological, Elsevier, vol. 42(1), pages 38-56, January.
  15. Schneider, Kerstin, 1997. " Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 45-49, March.
  16. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.
  17. Richard Arnott & Tilmann Rave & Ronnie Schöb, 2005. "Alleviating Urban Traffic Congestion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012197, June.
  18. Bayindir-Upmann, Thorsten & Raith, Matthias G., 2003. "Should high-tax countries pursue revenue-neutral ecological tax reforms?," European Economic Review, Elsevier, vol. 47(1), pages 41-60, February.
  19. Sandmo, Agnar, 2000. "The Public Economics of the Environment," OUP Catalogue, Oxford University Press, number 9780198297987, March.
  20. Safirova, Elena, 2002. "Telecommuting, traffic congestion, and agglomeration: a general equilibrium model," Journal of Urban Economics, Elsevier, vol. 52(1), pages 26-52, July.
  21. Matthias Wrede, 2000. "Tax Deductibility of Commuting Expenses and Leisures: On the Tax Treatment of Time-Saving Expenditure," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(2), pages 216-, March.
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