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The Effect of Transport Policies on Car Use: A Bundling Model with Applications

Author

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  • Francisco Gallego

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Juan-Pablo Montero

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Christian Salas

Abstract

In an effort to reduce pollution and congestion, Latin American cities have experimented with different policies to persuade drivers to give up their cars in favor of public transport. Borrowing from the bundling literature, the paper presents a novel model of vertical and horizontal differentiation applied to transport decisions: households differ in their preferences for transportation modes -cars vs public transport- and in the amount of travel. The model captures in a simple way a household's response to a policy shock, i.e., how to allocate existing car capacity, if any, to competing uses (peak vs off-peak hours) and how to adjust such capacity overtime. Using few observables, the model is then used to analyze the effects of two major transport policies: the driving restriction program introduced in Mexico-City in November of 1989 -Hoy-No-Circula (HNC)- and the public transport reform carried out in Santiago in February of 2007 -Transantiago (TS). The model's simulated effects are not only consistent with the econometric estimates in Gallego et al (2013) but also help understand the mechanisms that explain them.

Suggested Citation

  • Francisco Gallego & Juan-Pablo Montero & Christian Salas, 2013. "The Effect of Transport Policies on Car Use: A Bundling Model with Applications," Documentos de Trabajo 432, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:432
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    References listed on IDEAS

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    1. Lucas W. Davis, 2008. "The Effect of Driving Restrictions on Air Quality in Mexico City," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 38-81, February.
    2. Eskeland, Gunnar S & Feyzioglu, Tarhan, 1997. "Rationing Can Backfire: The "Day without a Car" in Mexico City," World Bank Economic Review, World Bank Group, vol. 11(3), pages 383-408, September.
    3. Ian W. H. Parry & Kenneth A. Small, 2009. "Should Urban Transit Subsidies Be Reduced?," American Economic Review, American Economic Association, vol. 99(3), pages 700-724, June.
    4. Mark Armstrong & John Vickers, 2010. "Competitive Non-linear Pricing and Bundling," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 30-60.
    5. de Grange, Louis & Troncoso, Rodrigo, 2011. "Impacts of vehicle restrictions on urban transport flows: The case of Santiago, Chile," Transport Policy, Elsevier, vol. 18(6), pages 862-869, November.
    6. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-436, June.
    7. Gallego, Francisco & Montero, Juan-Pablo & Salas, Christian, 2013. "The effect of transport policies on car use: Evidence from Latin American cities," Journal of Public Economics, Elsevier, vol. 107(C), pages 47-62.
    8. Caffera, Marcelo, 2011. "The use of economic instruments for pollution control in Latin America: lessons for future policy design," Environment and Development Economics, Cambridge University Press, vol. 16(03), pages 247-273, June.
    9. Onursal, B. & Gautam, S.P., 1997. "Vehicular Air Pollution: Experiences from Seven Latin American Urban Centers," Papers 373, World Bank - Technical Papers.
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    Citations

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    Cited by:

    1. Christian Hilber & Charles Palmer, 2014. "Urban development and air pollution: Evidence from a global panel of cities," GRI Working Papers 175, Grantham Research Institute on Climate Change and the Environment.
    2. Paul Carrillo & Andrea López & Arun Malik, 2016. "Pollution or Crime: The Effect of Driving Restrictions on Criminal Activity," IDB Publications (Working Papers) 7731, Inter-American Development Bank.
    3. Catherine Hausman & David S. Rapson, 2017. "Regression Discontinuity in Time: Considerations for Empirical Applications," NBER Working Papers 23602, National Bureau of Economic Research, Inc.
    4. Shengyuan Zhang & Jimin Zhao, 2016. "Low-Carbon Futures for Shenzhen’s Urban Passenger Transport System," HKUST IEMS Working Paper Series 2016-33, HKUST Institute for Emerging Market Studies, revised Jun 2016.
    5. Gallego, Francisco & Montero, Juan-Pablo & Salas, Christian, 2013. "The effect of transport policies on car use: Evidence from Latin American cities," Journal of Public Economics, Elsevier, vol. 107(C), pages 47-62.
    6. Zhang, Wei & Lin Lawell, C.-Y. Cynthia & Umanskaya, Victoria I., 2017. "The effects of license plate-based driving restrictions on air quality: Theory and empirical evidence," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 181-220.
    7. Liu, Yunxia & Hong, Zaisheng & Liu, Yong, 2016. "Do driving restriction policies effectively motivate commuters to use public transportation?," Energy Policy, Elsevier, vol. 90(C), pages 253-261.
    8. Diao, Qinghua & Sun, Wei & Yuan, Xinmei & Li, Lili & Zheng, Zhi, 2016. "Life-cycle private-cost-based competitiveness analysis of electric vehicles in China considering the intangible cost of traffic policies," Applied Energy, Elsevier, vol. 178(C), pages 567-578.
    9. Hua Ma & Guizhen He, 2016. "Effects of the Post-Olympics Driving Restrictions on Air Quality in Beijing," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-15, September.
    10. repec:eee:trapol:v:60:y:2017:i:c:p:119-130 is not listed on IDEAS

    More about this item

    Keywords

    public transport; driving restrictions; pollution; congestion;

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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