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7. Marginal Social Cost Pricing For All Transport Modes And The Effects Of Modal Budget Constraints

  • Proost, Stef
  • Van Dender, Kurt

This paper studies the order of magnitude of the pricing corrections that are needed to implement marginal social cost pricing for all transport modes. With the TRENEN model we study this question for 6 areas in the EU. As marginal social cost pricing may generate important surpluses and deficits for the different modes, we also study the effects of two alternative pricing rules that satisfy budget constraints. We examine the effects of average cost pricing that guarantees a budget balance per mode. The second alternative pricing rule we study is social Ramsey pricing (or marginal social cost pricing with a budget constraint) where we impose a budget constraint at the level of the transport sector. We estimate transport effects and welfare effects of the three pricing rules. We show that average pricing rules may actually do worse than the present pricing rules and that social Ramsey pricing may achieve 50% or more of the maximal welfare gain.

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Article provided by Elsevier in its journal Research in Transportation Economics.

Volume (Year): 9 (2004)
Issue (Month): 1 (January)
Pages: 159-177

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Handle: RePEc:eee:retrec:v:9:y:2004:i:1:p:159-177
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  1. Stef Proost & Kurt Van Dender & Christoph Courcelle & John Peirson & Duncan Sharp, 2001. "How large is the gap between present and efficient transport prices in Europe?," Chapters, in: Reforming Transport Pricing in the European Union, chapter 17 Edward Elgar.
  2. DE BORGER, Bruno, . "Discrete choice models and optimal two-part tariffs in the presence of externalities: Optimal taxation of cars," Working Papers 2000021, University of Antwerp, Faculty of Applied Economics.
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