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A political economy model of road pricing

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  • DE BORGER, Bruno
  • PROOST, Stef

Abstract

In this paper, we take a political economy approach to study the introduction of urban congestion tolls, using a simple majority voting model. Making users pay for external congestion costs is for an economist an obvious reform, but successful introductions of externality pricing in transport are rare. In the few cases where tolls were actually introduced, implementation was characterized by two salient facts. First, the toll revenues were tied to improvements of public transport. Second, opposition to the introduction of tolling decreased substantially after it was introduced. In most cases, a majority was against ex ante, but a majority favored the introduction of tolling after it was implemented. This paper develops a stylized model with car and public transport, allowing for idiosyncratic uncertainty about modal substitution costs. We show that uncertainty reduces the number of voters that favors road pricing ex ante. The model can explain the presence of a majority that is against road pricing ex ante and in favor ex post. Moreover, uncertainty also implies that, if a majority is against ex ante, there will be no majority for organizing an experiment that would take away the individual uncertainty. Finally, we show that it is easier to obtain a majority when the toll revenues are used to subsidize public transport than when they are used for a tax refund.

Suggested Citation

  • DE BORGER, Bruno & PROOST, Stef, 2010. "A political economy model of road pricing," Working Papers 2010014, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2010014
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why road pricing is so difficult to impose
      by Economic Logician in Economic Logic on 2010-08-24 19:14:00

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    Cited by:

    1. Bruno Borger & Stef Proost, 2016. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 934-959, October.
    2. Kilani, Moez & Proost, Stef & van der Loo, Saskia, 2014. "Road pricing and public transport pricing reform in Paris: Complements or substitutes?," Economics of Transportation, Elsevier, vol. 3(2), pages 175-187.
    3. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    4. De Borger, Bruno & Russo, Antonio, 2017. "The political economy of pricing car access to downtown commercial districts," Transportation Research Part B: Methodological, Elsevier, vol. 98(C), pages 76-93.
    5. Giacomo A. M. Ponzetto & Edward L. Glaeser, 2017. "The political economy of transportation investment," Economics Working Papers 1556, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2017.
    6. Westin, Jonas & Franklin, Joel P. & Proost, Stef & Basck, Pierre & Raux, Charles, 2016. "Achieving political acceptability for new transport infrastructure in congested urban regions," Transportation Research Part A: Policy and Practice, Elsevier, vol. 88(C), pages 286-303.
    7. De Borger, Bruno & Proost, Stef, 2015. "The political economy of public transport pricing and supply decisions," Economics of Transportation, Elsevier, vol. 4(1), pages 95-109.
    8. Jesper de Groote & Jos van Ommeren & Hans R.A. Koster, 2017. "The Impact of Parking Policy on House Prices," Tinbergen Institute Discussion Papers 17-037/VIII, Tinbergen Institute.
    9. De Borger, Bruno & Proost, Stef, 2016. "Can we leave road pricing to the regions? -The role of institutional constraints," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 208-222.
    10. Fosgerau, Mogens & de Palma, André, 2013. "The dynamics of urban traffic congestion and the price of parking," Journal of Public Economics, Elsevier, vol. 105(C), pages 106-115.
    11. Bruno De Borger & Jan Rouwendal, 2014. "Car User Taxes, Quality Characteristics, and Fuel Efficiency Household Behaviour and Market Adjustment," Journal of Transport Economics and Policy, University of Bath, vol. 48(3), pages 345-366, September.
    12. Grahn-Voorneveld , Sofia, 2014. "The inefficiency of marginal cost pricing on roads," Working papers in Transport Economics 2014:16, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    13. Börjesson, Maria & Hamilton, Carl J. & Näsman, Per & Papaix, Claire, 2015. "Factors driving public support for road congestion reduction policies: Congestion charging, free public transport and more roads in Stockholm, Helsinki and Lyon," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 452-462.
    14. repec:eee:juecon:v:99:y:2017:i:c:p:31-47 is not listed on IDEAS
    15. Russo, Antonio, 2013. "Voting on road congestion policy," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 707-724.
    16. Hensher, David A. & Li, Zheng, 2013. "Referendum voting in road pricing reform: A review of the evidence," Transport Policy, Elsevier, vol. 25(C), pages 186-197.
    17. Dieplinger, Maria & Fürst, Elmar, 2014. "The acceptability of road pricing: Evidence from two studies in Vienna and four other European cities," Transport Policy, Elsevier, vol. 36(C), pages 10-18.
    18. Bruno De Borger & Stef Proost, 2015. " Tax and regulatory policies for European Transport – getting there, but in the slow lane," Working Papers Department of Economics 497597, KU Leuven, Faculty of Economics and Business, Department of Economics.
    19. Bruno De Borger & Antonio Russo, 2015. "The Political Economy of Pricing Car Access to Downtown Commercial Districts," CESifo Working Paper Series 5294, CESifo Group Munich.
    20. André De Palma & Stef Proost & Ravi Seshadri & Moshe Ben-Akiva, 2016. "Tolls Versus Mobility Permits: A Comparative Analysis," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01397582, HAL.
    21. Proost, Stef & Thisse, Jacques-François, 2015. "Skilled Cities, Regional Disparities, and Efficient Transport: The state of the art and a research agenda," CEPR Discussion Papers 10790, C.E.P.R. Discussion Papers.
    22. David Hensher & Corinne Mulley, 2014. "Complementing distance based charges with discounted registration fees in the reform of road user charges: the impact for motorists and government revenue," Transportation, Springer, vol. 41(4), pages 697-715, July.
    23. Fosgerau, Mogens & de Palma, André, 2013. "The dynamics of urban traffic congestion and the price of parking�," MPRA Paper 48433, University Library of Munich, Germany.
    24. Stef Proost & Jacques-Francois Thisse, 2017. "What Can Be Learned from Spatial Economics?," HSE Working papers WP BRP 167/EC/2017, National Research University Higher School of Economics.

    More about this item

    Keywords

    Road pricing; Acceptability of tolls; Policy reform; Earmarking of toll revenues; Pigouvian taxes;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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