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Revenue-recycling within Transport Networks

Author

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  • Yukihiro Kidokoro

    (National Graduate Institute for Policy Studies)

Abstract

This paper analyzes the second-best pricing and investment policy for transport networks with a revenue-recycling mechanism in which the toll revenue is used as transport investments or subsidies, as in London’s congestion charging scheme. The results of this paper demonstrate that the way toll revenue is used significantly modifies the usual results, where a lump-sum transfer is assumed. First, revenue-recycling as investment has an effect that works to increase the second-best toll when the benefits from it are larger than the costs. Revenue-recycling as a subsidy does not have such an effect. Second, ‘partial’ cost?benefit analysis that focuses only on the targeted transport mode would usually lead to a false conclusion as to whether the toll revenues should be used as transport investments, subsidies, or general tax revenues. The ‘full’ cost? benefit analysis, which includes changes in consumer surplus and producer surplus in all transport modes, is necessary.

Suggested Citation

  • Yukihiro Kidokoro, 2008. "Revenue-recycling within Transport Networks," GRIPS Discussion Papers 08-07, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:08-07
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    References listed on IDEAS

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    1. repec:ebl:ecbull:v:18:y:2005:i:1:p:1-6 is not listed on IDEAS
    2. William C. Wheaton, 1978. "Price-Induced Distortions in Urban Highway Investment," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 622-632, Autumn.
    3. Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545 Elsevier.
    4. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 1 Investment and the use of tax and toll revenues in the transport sector: The research agenda," Research in Transportation Economics, Elsevier, vol. 19(1), pages 1-26, January.
    5. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 645-671, December.
    6. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
    7. Small, Kenneth A., 1992. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt32p9m3mm, University of California Transportation Center.
    8. Proost, Stef & De Borger, Bruno & Koskenoja, Pia, 2007. "Chapter 3 Public finance aspects of transport charging and investments," Research in Transportation Economics, Elsevier, vol. 19(1), pages 59-80, January.
    9. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
    10. de Palma, André & Lindsey, Robin & Proost, Stef, 2007. "Chapter 12 Synthesis of case study results and future prospects," Research in Transportation Economics, Elsevier, vol. 19(1), pages 269-297, January.
    11. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
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    Cited by:

    1. repec:eee:juecon:v:102:y:2017:i:c:p:106-122 is not listed on IDEAS
    2. De Borger, Bruno & Proost, Stef, 2012. "A political economy model of road pricing," Journal of Urban Economics, Elsevier, vol. 71(1), pages 79-92.
    3. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2015. "On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city," Journal of Urban Economics, Elsevier, vol. 89(C), pages 32-47.
    4. Lindsey, Robin, 2012. "Road pricing and investment," Economics of Transportation, Elsevier, vol. 1(1), pages 49-63.

    More about this item

    Keywords

    Congestion tax; Revenue-recycling; Road pricing; Transport Network; Costbenefit analysis;

    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
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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