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Road Funds, User Charges and Taxes


  • Gwilliam, Ken
  • Shalizi, Zmarak


Insufficient or uncertain budgetary allocations to road maintenance have resulted in road deterioration that has significantly increased production and transport costs in many countries. To avoid this problem, highway professionals advocate the establishment of dedicated road finds, managed by independent road boards made up of user representatives. The road boards would have the power to determine both the level of charges for road use and the level of expenditure on road maintenance. By contrast, macroeconomists and public finance specialists have tended to resist the establishment of dedicated road finds. They argue that road finds reduce fiscal flexibility, do not adequately address problems associated with the provision of public goods or the internalization of externalities, and often are not well managed. In general, there are two long-term institutional options for reconciling fiscal prudence with asset maintenance: a road agency that is operated commercially (subject to the normal oversight of behavior accorded to privatized monopolies), or a reformed and well-functioning budget process. This article argues that road finds must be viewed as a provisional, case-specific intermediate step in the direction of one of the long-term solutions. The role and nature of road finds should be assessed not on general principles but on a case-by-case basis through the analysis of likely micro- and macroeconomic effects. The article recommends indicators for use in specific cases to determine whether a road find should be introduced, continued, or abolished. Copyright 1999 by Oxford University Press.

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  • Gwilliam, Ken & Shalizi, Zmarak, 1999. "Road Funds, User Charges and Taxes," World Bank Research Observer, World Bank Group, vol. 14(2), pages 159-185, August.
  • Handle: RePEc:oup:wbrobs:v:14:y:1999:i:2:p:159-85

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    References listed on IDEAS

    1. Hau, Timothy D., 1992. "Economic fundamentals of road pricing : a diagrammatic analysis," Policy Research Working Paper Series 1070, The World Bank.
    2. International Monetary Fund, 1988. "Case for Earmarked Taxes; Theory and Example," IMF Working Papers 88/18, International Monetary Fund.
    3. Gupta, Sanjeev & Mahler, Walter, 1995. "Taxation of petroleum products : Theory and empirical evidence," Energy Economics, Elsevier, vol. 17(2), pages 101-116, April.
    4. Heggie, I.G. & Vickers, P., 1998. "Commercial Management and Financing of Roads," Papers 409, World Bank - Technical Papers.
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    Cited by:

    1. Saiz, Albert, 2006. "Dictatorships and highways," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 187-206, March.
    2. Dioikitopoulos, Evangelos V. & Kalyvitis, Sarantis, 2008. "Public capital maintenance and congestion: Long-run growth and fiscal policies," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3760-3779, December.
    3. World Bank, 2003. "Argentina : Reforming Policies and Institutions for Efficiency and Equity of Public Expenditures," World Bank Other Operational Studies 14637, The World Bank.
    4. Brenck, Andreas & Beckers, Thorsten & Heinrich, Maria & von Hirschhausen, Christian, 2005. "Public-private partnerships in new EU member countries of Central and Eastern Europe: An economic analysis with case studies from the highway sector," EIB Papers 10/2005, European Investment Bank, Economics Department.
    5. Albert Saiz, 2002. "Democracy to the road: the political economy of potholes," Working Papers 02-17, Federal Reserve Bank of Philadelphia.
    6. Sun, Zhentian & Li, Xuhong & Xie, Yuanchang, 2014. "A comparison of innovative financing and general fiscal investment strategies for second-class highways: Perspectives for building a sustainable financing strategy," Transport Policy, Elsevier, vol. 35(C), pages 193-201.
    7. Dodoo, Nii Amoo & Thorpe, Neil, 2005. "A new approach for allocating pavement damage between heavy goods vehicles for road-user charging," Transport Policy, Elsevier, vol. 12(5), pages 419-430, September.
    8. Dimitar Radev & Richard I Allen, 2006. "Managing and Controlling Extrabudgetary Funds," IMF Working Papers 06/286, International Monetary Fund.

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