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Second-best urban tolling with distributive concerns
KTH, School of Architecture and the Built Environment (ABE), Centres, Centre for Transport Studies, CTS. Center of Economics Studies, KULeuven, Belgium.
2014 (English)In: Economics of Transportation, ISSN 2212-0122, Vol. 3, no 4, 257-269 p.Article in journal (Refereed) Published
Abstract [en]

This paper analyzes the optimal urban congestion toll in a second-best setting where only one road in a network can be tolled. Both heterogeneity in labor productivity and income distribution concerns are considered. The optimal toll balances two types of considerations. The first consideration is the correction of the congestion externality on the tolled road given the distortion on the non-tolled roads, while the second is the equity consideration that takes into account which income group uses the tolled road and how toll revenues are spent. Both separating and pooling equilibria are analyzed for two alternative uses of toll revenues: poll transfers and labor-tax cuts. Using numerical simulations, we show that equity concerns can lead a government to prefer inefficient toll levels and recycling via poll transfers rather than via labor tax reductions.

Place, publisher, year, edition, pages
2014. Vol. 3, no 4, 257-269 p.
Keyword [en]
Congestion pricing, Tax reform, Urban tolls
National Category
Transport Systems and Logistics
URN: urn:nbn:se:kth:diva-166964DOI: 10.1016/j.ecotra.2015.02.003ScopusID: 2-s2.0-84928092210OAI: diva2:814834

QC 20150528

Available from: 2015-05-28 Created: 2015-05-21 Last updated: 2015-05-28Bibliographically approved

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Proost, Stefaan
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