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Comparing the Efficiency of Alternative Policies for Reducing Traffic Congestion

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  • Parry, Ian W.H.

Abstract

This paper compares the efficiency of a single lane toll, a congestion tax applied uniformly across freeway lanes, a gasoline tax, and a transit fare subsidy at reducing traffic congestion. The model incorporates a variety of conditions required to reach an efficient outcome. These include conditions for the efficient allocation of travel among competing modes, travel at peak versus off-peak periods, and drivers with high and low time costs sorted onto faster and slower freeway lanes. Each policy violates some or all of the efficiency conditions. Under wide parameter scenarios, the single lane toll, gasoline tax, and transit subsidy forgo at least two thirds of the efficiency gains under an "ideal" congestion tax that varies across lanes. In contrast, the uniform congestion tax can achieve more than 90 percent of the efficiency gains, despite failing to separate out drivers with high and low time costs onto different freeway lanes.

Suggested Citation

  • Parry, Ian W.H., 2000. "Comparing the Efficiency of Alternative Policies for Reducing Traffic Congestion," Discussion Papers 10517, Resources for the Future.
  • Handle: RePEc:ags:rffdps:10517
    DOI: 10.22004/ag.econ.10517
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    References listed on IDEAS

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    1. Harrington, Winston & Krupnick, Alan J. & Alberini, Anna, 2001. "Overcoming public aversion to congestion pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(2), pages 87-105, February.
    2. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
    3. 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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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Public Economics;

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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