Vehicle ownership and usage charges
We present a simple model to study the welfare effects of a shift from ownership to usage taxes for cars. We consider a model in which a single representative consumer derives utility from consuming two goods--consumption of motor vehicle kilometers, and an aggregate consumption good treated as numeraire. We characterize the optimal consumption of car kilometers by a representative car user and find that a shift from ownership towards usage taxes is not necessarily welfare-improving: while a revenue-neutral shift makes the representative car user worse off; a utility-neutral shift leads to a significant loss of revenue to the government. An empirical analysis based on Singapore data is also consistent with our theoretical results.
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Volume (Year): 17 (2010)
Issue (Month): 6 (November)
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- Chin, Anthony & Smith, Peter, 1997. "Automobile ownership and government policy: The economics of Singapore's vehicle quota scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 31(2), pages 129-140, March.
- Ngee-Choon Chia & Albert K C Tsui & John Whalley, 2001. "Ownership and Use Taxes as Congestion Correcting Instruments," NBER Working Papers 8278, National Bureau of Economic Research, Inc.
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- Barter, Paul A., 2005. "A vehicle quota integrated with road usage pricing: A mechanism to complete the phase-out of high fixed vehicle taxes in Singapore," Transport Policy, Elsevier, vol. 12(6), pages 525-536, November.
- De Jong, G. C., 1990. "An indirect utility model of car ownership and private car use," European Economic Review, Elsevier, vol. 34(5), pages 971-985, July.
- Willoughby, C., 2001. "Singapore's motorization policies 1960-2000," Transport Policy, Elsevier, vol. 8(2), pages 125-139, April.
- Phang, Sock-Yong & Wong, Wing-Keung & Chia, Ngee-Choon, 1996. "Singapore's experience with car quotas : Issues and policy processes," Transport Policy, Elsevier, vol. 3(4), pages 145-153, October.
- Stopher, Peter R., 2004. "Reducing road congestion: a reality check," Transport Policy, Elsevier, vol. 11(2), pages 117-131, April.
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