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Should buses still be subsidized in Stockholm?

Author

Listed:
  • Maria Börjesson
  • Chau Man Fung
  • Stef Proost

Abstract

Many public transport services are heavily subsidized. One of the main justifications of this is the expected beneficial effect on road congestion. Stockholm introduced congestion pricing in 2006 and the effects on car and public transport demand were carefully monitored. This change in prices provides unique estimates on price- and cross-price elasticities. This paper uses these data to model the optimal pricing, frequency, bus size and number of bus lanes for a corridor in the presence of congestion pricing of cars. Results show that the subsidies for peak bus trips are indeed too high. However, the major welfare benefits of the reform are due to a decrease in frequencies during the off-peak period and the use of larger buses.

Suggested Citation

  • Maria Börjesson & Chau Man Fung & Stef Proost, 2015. "Should buses still be subsidized in Stockholm?," Working Papers of Department of Economics, Leuven 518627, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:518627
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    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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