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

  • DE BORGER, Bruno
  • WUYTS, Bart

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.

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Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2007020.

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Length: 31 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:ant:wpaper:2007020
Contact details of provider: Postal: Prinsstraat 13, B-2000 Antwerpen
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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  1. 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 161-79, March.
  2. 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 645-71, December.
  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. Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Discussion Papers dp-98-22, Resources For the Future.
  5. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  6. 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, London School of Economics and University of Bath, vol. 35(2), pages 137-160, May.
  7. 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.
  8. Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental levies and distortionary taxation," Other publications TiSEM 4b32deaa-ec2f-4de7-b59b-9, School of Economics and Management.
  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. 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.
  11. 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.
  12. 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.
  13. 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.
  14. Bruno De Borger & Stef Proost (ed.), 2001. "Reforming Transport Pricing in the European Union," Books, Edward Elgar, number 1822.
  15. Kurt Van Dender, 2003. "Transport Taxes with Multiple Trip Purposes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 295-310, 06.
  16. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  17. Richard Arnott & Tilmann Rave & Ronnie Schöb, 2005. "Alleviating Urban Traffic Congestion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012197, June.
  18. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
  19. repec:ucp:bkecon:9781884829987 is not listed on IDEAS
  20. 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.
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