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Political Economy of Commuting Subsidies

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  • Rainald Borck
  • Matthias Wrede

Abstract

We study the political economy of commuting subsidies in a model of a mono-centric city with two income classes. Depending on housing demand and transport costs, either the rich or the poor live in the central city and the other group in the suburbs. Commuting subsidies increase the net income of those with long commutes or high transport costs. They also affect land rents and therefore the income of landowners. The paper studies how the locational pattern of the two income classes and the incidence of landownership affects the support for commuting subsidies.

Suggested Citation

  • Rainald Borck & Matthias Wrede, 2004. "Political Economy of Commuting Subsidies," Discussion Papers of DIW Berlin 445, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp445
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    References listed on IDEAS

    as
    1. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
    2. Arnott, Richard J & Stiglitz, Joseph E, 1981. "Aggregate Land Rents and Aggregate Transport Costs," Economic Journal, Royal Economic Society, vol. 91(362), pages 331-347, June.
    3. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, December.
    4. Brueckner, Jan K., 2005. "Transport subsidies, system choice, and urban sprawl," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 715-733, November.
    5. de Bartolome, Charles A. M. & Ross, Stephen L., 2003. "Equilibria with local governments and commuting: income sorting vs income mixing," Journal of Urban Economics, Elsevier, vol. 54(1), pages 1-20, July.
    6. Jutta Kloas & Hartmut Kuhfeld, 2003. "Entfernungspauschale: Bezieher hoher Einkommen begünstigt: aktuelle Ergebnisse zum Verkehrsverhalten privater Haushalte," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 70(42), pages 623-629.
    7. Wrede, Matthias, 2001. "Should Commuting Expenses Be Tax Deductible? A Welfare Analysis," Journal of Urban Economics, Elsevier, vol. 49(1), pages 80-99, January.
    8. Hartwick, John & Schweizer, Urs & Varaiya, Pravin, 1976. "Comparative statics of a residential economy with several classes," Journal of Economic Theory, Elsevier, vol. 13(3), pages 396-413, December.
    9. Zenou, Yves, 2000. "Urban unemployment, agglomeration and transportation policies," Journal of Public Economics, Elsevier, vol. 77(1), pages 97-133, July.
    10. Pines, David & Sadka, Efraim, 1986. "Comparative statics analysis of a fully closed city," Journal of Urban Economics, Elsevier, vol. 20(1), pages 1-20, July.
    11. Wheaton, William C., 1976. "On the optimal distribution of income among cities," Journal of Urban Economics, Elsevier, vol. 3(1), pages 31-44, January.
    12. Stefan Bach, 2003. "Entfernungspauschale: Kürzung gerechtfertigt," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 70(40), pages 602-608.
    13. Matthias Wrede, 2003. "Tax Deductibility of Commuting Expenses and Residential Land Use with more than one Center," CESifo Working Paper Series 972, CESifo Group Munich.
    14. Matthias Wrede, 2000. "Tax Deductibility of Commuting Expenses and Leisures: On the Tax Treatment of Time-Saving Expenditure," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(2), pages 216-216, March.
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    More about this item

    Keywords

    Commuting subsidies; Voting; Monocentric city;

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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