Individual uncertainty and the political acceptability of road pricing policies
This paper investigates the issue of political feasibility of a road pricing policies (RPP). Referring to a literature developed in international trade theory (Fernandez and Rodrick, 1991), this paper presents a model regarding the role and relevance of individual specific uncertainty in explaining the political acceptability of RPP. It is shown that: a) without money transfers, i.e., reimbursements of the tax levied, and with no uncertainty, RPP might not be accepted thus giving rise to an evident trade-off between economic efficiency and political acceptability; b) when individual specific uncertainty is assumed, optimal level of RPP, may, under given conditions concerning the number of voters and people preferences, become politically acceptable. Two different strategies can be envisaged to render RPP politically feasible: gradual and radical. The first strategy foresees a low corrective tax that eliminates only a small proportion of the excessive use of the public good and provides an acceptable balance between monetary loss and environment improvement. Alternatively, a radical strategy would foresee a much higher level of tax substantially reducing the number of people consuming the public good and providing a potentially higher and concentrated payoff to those still consuming it after the policy is implemented. This latter policy appears more easily sustainable under majority than unanimity voting.
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- Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
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