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Efficiency of road pricing schemes with endogenous workplace locations in a polycentric city

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  • Romain Gaté

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper aims to measure the efficiency of different road pricing schemes (Pigouvian tax, flat tax and cordon toll) to address congestion externalities when the locations of jobs and dwellings within a city are endogenous. The model captures the fact that commuters face a trade-off between taking advantage of the wage premium in the Central Business District (CBD) and being stuck in traffic. I find that the Pigouvian tax strategy is not a social optimum due to the presence of two market failures in the urban economy: congestion and misallocation of jobs within the city. A Pigouvian tax on commuters cannot solve two different problems simultaneously, namely, reducing the congestion level given the locations of jobs and reaching the optimal spatial allocation of firms. Without regulation, the number of jobs in the CBD is too high (and the congestion cost is excessive), while the Pigouvian tax generates a CBD that is too small. In addition, a flat tax is not necessarily worse than a Pigouvian tax, in contrast to the cordon toll.

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  • Romain Gaté, 2019. "Efficiency of road pricing schemes with endogenous workplace locations in a polycentric city," Working Papers halshs-02335766, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02335766
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02335766
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    Keywords

    Polycentric city; Second-best policies; Congestion; Welfare; Urban land use;
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