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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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    References listed on IDEAS

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    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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