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Congestion Tolling with Agglomeration Externalities

  • Richard Arnott

    ()

    (Boston College)

Consider an urban economy with two types of externalities, negative traffic congestion externalities and positive agglomeration externalities deriving from non-market interaction. Suppose that urban travel can be tolled, that non-market interaction cannot be subsidized, and that non-market interaction is stimulated by a reduction in travel costs. Then the optimal toll is below the congestion externality cost. This paper explores this line of reasoning.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 660.

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Length: 34 pages
Date of creation: 26 Mar 2007
Date of revision:
Handle: RePEc:boc:bocoec:660
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  1. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October.
  2. Robin Boadway & Richard Harris, 1975. "A Characterization of Piecemeal Second Best Policy," Working Papers 195, Queen's University, Department of Economics.
  3. Chipman, John S, 1970. "External Economies of Scale and Competitive Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 347-85, August.
  4. Stuart S. Rosenthal & William C. Strange, 1999. "Geography, Industrial Organization, and Agglomeration," Center for Policy Research Working Papers 14, Center for Policy Research, Maxwell School, Syracuse University.
  5. repec:dgr:uvatin:20000084 is not listed on IDEAS
  6. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
  7. Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999. "Urban transportation," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999 Elsevier.
  8. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
  9. Parry, Ian & Bento, Antonio, 1999. "Revenue Recycling and the Welfare Effects of Road Pricing," Discussion Papers dp-99-45, Resources For the Future.
  10. Enrico Moretti, 2003. "Human Capital Externalities in Cities," NBER Working Papers 9641, National Bureau of Economic Research, Inc.
  11. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers 75, Queen's University, Department of Economics.
  12. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  13. Henderson, J. Vernon, 1981. "The economics of staggered work hours," Journal of Urban Economics, Elsevier, vol. 9(3), pages 349-364, May.
  14. Mills, Edwin S & Ferranti, David M, 1971. "Market Choices and Optimum City Size," American Economic Review, American Economic Association, vol. 61(2), pages 340-45, May.
  15. Richard Arnott & Marvin Kraus, 1997. "When are Anonymous Congestion Charges Consistent with Marginal Cost Pricing?," Boston College Working Papers in Economics 354., Boston College Department of Economics.
  16. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  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. Fu, Shihe, 2007. "Smart Cafe Cities: Testing human capital externalities in the Boston metropolitan area," Journal of Urban Economics, Elsevier, vol. 61(1), pages 86-111, January.
  19. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, 07.
  20. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  21. William C. Wheaton, 1978. "Price-Induced Distortions in Urban Highway Investment," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 622-632, Autumn.
  22. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
  23. Wilson, John D., 1983. "Optimal road capacity in the presence of unpriced congestion," Journal of Urban Economics, Elsevier, vol. 13(3), pages 337-357, May.
  24. 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.
  25. Shihe Fu & Stephen L. Ross, 2007. "Wage Premia in Employment Clusters: Does Worker Sorting Bias Estimates?," Working papers 2007-26, University of Connecticut, Department of Economics, revised Dec 2009.
  26. Kanemoto, Yoshitsugu, 1977. "Cost-benefit analysis and the second best land use for transportation," Journal of Urban Economics, Elsevier, vol. 4(4), pages 483-503, October.
  27. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-79, June.
  28. Wilson, Paul W., 1988. "Wage variation resulting from staggered work hours," Journal of Urban Economics, Elsevier, vol. 24(1), pages 9-26, July.
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