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Labor Market Effects of Congestion Pricing in a Heterogeneous Population
KTH, School of Architecture and the Built Environment (ABE), Transport Science, Transport and Location Analysis.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Do congestion pricing reduce labor supply? Since a congestion charge raises the monetary cost of car commuting, concerns have been raised that the toll may decrease labor supply at the extensive margin in a similar way as an income tax. The paper studies the effect of a congestion charge on welfare, equity and labor supply in a commuting population with heterogeneous value of time and endogenous labor supply. The congestion charge decreases labor supply among commuters who change from car to public transport, but increases labor supply among the remaining car commuters. When explicitly taking into account that commuters have different value of time, aggregate labor supply is found to increase even when the revenues are not recycled back to the commuters. This indicates that a congestion charge by itself does not reduce aggregate labor supply. The analysis hence stresses the importance of recognizing traveler heterogeneity when analyzing congestion pricing.

Keyword [en]
congestion toll; tax distortions; welfare effects; equity; labor supply; revenue recycling
National Category
Economics Transport Systems and Logistics
Research subject
SRA - Transport
Identifiers
URN: urn:nbn:se:kth:diva-103234OAI: oai:DiVA.org:kth-103234DiVA: diva2:559105
Funder
VinnovaTrenOp, Transport Research Environment with Novel Perspectives
Note

QS 2012

Available from: 2012-10-07 Created: 2012-10-07 Last updated: 2012-10-10Bibliographically approved
In thesis
1. Efficiency and acceptability of pricing policies and transport investments in distorted economies
Open this publication in new window or tab >>Efficiency and acceptability of pricing policies and transport investments in distorted economies
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis contains five papers studying the economic efficiency and political acceptability of road pricing policies and transport investments in distorted economies. Interactions between the transport market and other distorted markets, such as the labor market, can have a large impact on the welfare effect of a road pricing policy or a transport investment. Many road pricing studies therefore try to incorporate effects from other distorted markets in the analysis. Paper I analyzes how the economic efficiency of a road toll in a distorted economy depends on assumptions about the initial tax system. In the road pricing literature, the welfare effect of a road toll is often found to depend on revenue use. Using a simple general equilibrium model paper I shows that the relative efficiency of marginal revenue recycling policies depends more on assumptions regarding inefficiencies in the initial tax system than on the road toll per se. Paper II studies the effect on welfare, equity and labor supply from a road toll in a commuting population with heterogeneous value of time and endogenous labor supply. When explicitly taking into account that commuters have different value of time, the road toll can increase total labor supply even when the revenues are not recycled back to the commuters. The analysis stresses the importance of recognizing traveler heterogeneity when analyzing congestion pricing. Road pricing policies are often characterized by conflicting interests between different stakeholders and different geographical areas. Papers III and IV study the economic efficiency and political acceptability of pricing and investment policies in different institutional and geographical settings. The main contribution of the papers is to explain how political constraints can lead to inefficient tolling strategies. The papers contribute to the existing literature on political acceptability of road pricing by analyzing the conflict and potential trade-off between political acceptability and economic efficiency. A difficulty when assessing the welfare effect of a future transport policy is also that many factors and parameters needed for the analysis are uncertain. Paper V studies the climate benefit of an investment in high speed rail by calculating the magnitude of annual traffic emission reduction required to compensate for the annualized embedded emissions from the construction of the line. The paper finds that to be able to balance the annualized emissions from the construction, traffic volumes of more than 10 million annual one-way trips are usually required, and most of the traffic diverted from other transport modes must come from aviation.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2012. ix, 26 p.
Series
TRITA-TSC-PHD, 12:003
Keyword
road pricing, transport investment, cost-benefit analysis, tax distortions, transport policies, welfare effects, political economy, acceptability
National Category
Economics Transport Systems and Logistics
Research subject
SRA - Transport
Identifiers
urn:nbn:se:kth:diva-103231 (URN)978-91-85539-95-6 (ISBN)
Public defence
2012-10-26, F3, Lindstedtsvägen 26, Kungliga Tekniska högskolan, Stockholm, 13:00 (English)
Opponent
Supervisors
Funder
TrenOp, Transport Research Environment with Novel Perspectives
Note

QC 20121010

Available from: 2012-10-10 Created: 2012-10-07 Last updated: 2016-08-15Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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