The Redistributive Effects of Transport Policies

Low-emission zones (LEZs) increase commuting costs by car but decrease negative traffic externalities in affected locations. High-income workers are more likely to sort in central locations where we expect the benefits of the policy to be the strongest, but are also more likely to commute by car. Thus, they should be more exposed to both the costs and benefits of driving restrictions. Using a quantitative urban model with rich worker heterogeneity and non-homothetic preferences, I argue that the redistributive effects of urban policies are indeed shaped by these differences in exposure and budget shares. After showing that the model is able to reproduce the patterns of sorting across space and transport modes observed in the Greater Paris region, I use it to compute the prospective effects of the Parisian LEZ. Results indicate that the policy would most likely increase welfare only at the top of the income distribution, while the rest of the population would suffer net losses.