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How large is the gap between present and efficient transport prices in Europe?

Author

Listed:
  • Stef Proost
  • Kurt Van Dender
  • C Courcelle
  • Bruno De Borger
  • J Peirson
  • R Vickerman
  • E Gibbons
  • M O'Mahony
  • Q Heaney
  • J Van den Bergh
  • E Verhoef

Abstract

In this paper we analyse the gap between present transport prices and efficient transport prices. Efficient transport prices are those prices that maximise economic welfare, including external costs (congestion, air pollution, accidents). The methodology is applied to six urban and interregional case studies using one common optimal pricing model. The case studies cover passenger as well as freight transport and cover all modes. We find that prices need to be raised most for peak urban passenger car transport and to a lesser extent for interregional road transport. Optimal pricing results for public transport are more mixed. We show that current external costs on congested roads are a bad guide for optimal taxes and tolls: the optimal toll that takes into account the reaction of demand is often less than one third of the present marginal external cost.

Suggested Citation

  • Stef Proost & Kurt Van Dender & C Courcelle & Bruno De Borger & J Peirson & R Vickerman & E Gibbons & M O'Mahony & Q Heaney & J Van den Bergh & E Verhoef, 2001. "How large is the gap between present and efficient transport prices in Europe?," Working Papers of Department of Economics, Leuven 544226, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:544226
    Note: paper number ETE WP 2001-20
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    Keywords

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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