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

  • Francisco Gallego

    ()

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

  • Juan-Pablo Montero

    ()

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

  • Christian Salas

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.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 432.

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Date of creation: 2013
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Handle: RePEc:ioe:doctra:432
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  1. Eberly, J.C., 1990. "Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases," Weiss Center Working Papers 22-91, Wharton School - Weiss Center for International Financial Research.
  2. Onursal, B. & Gautam, S.P., 1997. "Vehicular Air Pollution: Experiences from Seven Latin American Urban Centers," Papers 373, World Bank - Technical Papers.
  3. 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, 02.
  4. Parry, Ian W.H. & Small, Kenneth, 2007. "Should Urban Transit Subsidies Be Reduced?," Discussion Papers dp-07-38, Resources For the Future.
  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. Armstrong, Mark & Vickers, John, 2006. "Competitive nonlinear pricing and bundling," MPRA Paper 70, University Library of Munich, Germany.
  7. 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.
  8. 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.
  9. 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.
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