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Commuting, transport tax reform and the labour market: Employer-paid parking and the relative efficiency of revenue recycling instruments

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  • DE BORGER, Bruno
  • WUYTS, Bart

Abstract

In this paper we study the welfare effects of a budgetary neutral increase in taxes on car commuters in a model that takes into account the presence of employer-paid parking at the workplace. Results include the following. First, we find that the presence of employer-paid parking substantially increases the welfare effect of such a tax reform, independent of the use of the revenues. The intuition is that congestion taxes not only correct congestion externalities, they also reduce the inefficiency caused by employer-paid parking. Second, different congestion effects of alternative recycling instruments and the presence of employer-paid parking jointly imply that recycling the tax revenues via higher public transport subsidies may yield much more favourable welfare effects than previously believed. It can easily outperform recycling the tax revenues via lower labour taxes. Third, cashing out parking costs to public transport users is found to generate substantial positive welfare effects. The theoretical predictions are illustrated using a numerical model calibrated on Belgian data.

Suggested Citation

  • DE BORGER, Bruno & WUYTS, Bart, 2007. "Commuting, transport tax reform and the labour market: Employer-paid parking and the relative efficiency of revenue recycling instruments," Working Papers 2007020, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2007020
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    References listed on IDEAS

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    1. Shoup, Donald C., 1997. "Evaluating the effects of cashing out employer-paid parking: Eight case studies," Transport Policy, Elsevier, vol. 4(4), pages 201-216, October.
    2. Shoup, Donald C., 1997. "Evaluating the effects of cashing out employer-paid parking: Eight case studies," University of California Transportation Center, Working Papers qt2qw4w2s1, University of California Transportation Center.
    3. Anderson, Simon P. & de Palma, Andre, 2004. "The economics of pricing parking," Journal of Urban Economics, Elsevier, vol. 55(1), pages 1-20, January.
    4. Bruno De Borger & Stef Proost (ed.), 2001. "Reforming Transport Pricing in the European Union," Books, Edward Elgar Publishing, number 1822.
    5. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    6. Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June.
    7. Gerard de Jong & Hugh Gunn, 2001. "Recent Evidence on Car Cost and Time Elasticities of Travel Demand in Europe," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 137-160, May.
    8. Richard Arnott & Tilmann Rave & Ronnie Schöb, 2005. "Alleviating Urban Traffic Congestion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012197, January.
    9. De Borger, Bruno & Van Dender, Kurt, 2003. "Transport tax reform, commuting, and endogenous values of time," Journal of Urban Economics, Elsevier, vol. 53(3), pages 510-530, May.
    10. Shoup, Donald C., 1993. "Cashing Out Employer-Paid Parking: A Precedent for Congestion Pricing?," University of California Transportation Center, Working Papers qt8xr2v0j1, University of California Transportation Center.
    11. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1991. "A temporal and spatial equilibrium analysis of commuter parking," Journal of Public Economics, Elsevier, vol. 45(3), pages 301-335, August.
    12. Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September.
    13. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 645-671, December.
    14. repec:ucp:bkecon:9781884829987 is not listed on IDEAS
    15. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    16. Edward Calthrop & Stef Proost & Kurt van Dender, 2000. "Parking Policies and Road Pricing," Urban Studies, Urban Studies Journal Limited, vol. 37(1), pages 63-76, January.
    17. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 64-77, November.
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    19. Kurt Van Dender, 2003. "Transport Taxes with Multiple Trip Purposes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 295-310, June.
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    Cited by:

    1. Fetene, Gebeyehu M. & Hirte, Georg & Kaplan, Sigal & Prato, Carlo G. & Tscharaktschiew, Stefan, 2016. "The economics of workplace charging," Transportation Research Part B: Methodological, Elsevier, vol. 88(C), pages 93-118.
    2. Stef Proost, 2011. "Theory of External Costs," Chapters,in: A Handbook of Transport Economics, chapter 14 Edward Elgar Publishing.
    3. Hirte, Georg & Tscharaktschiew, Stefan, 2011. "Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities," Dresden Discussion Paper Series in Economics 02/11, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    4. van Ommeren, Jos & Wentink, Derk & Dekkers, Jasper, 2011. "The real price of parking policy," Journal of Urban Economics, Elsevier, vol. 70(1), pages 25-31, July.
    5. repec:eee:transb:v:101:y:2017:i:c:p:107-122 is not listed on IDEAS
    6. Jan K. Brueckner & Sofia F. Franco, 2017. "Employer-Paid Parking, Mode Choice, and Suburbanization," CESifo Working Paper Series 6298, CESifo Group Munich.

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