The Economics of Sub-optimal Policies for Traffic Congestion

Economics prescribes a congestion tax to alleviate the negative effects of traffic congestion. However, traffic congestion is a pervasive problem in cities and a tax is seldom applied. Why? To answer this question, we estimate and simulate the welfare and traffic effects of a congestion tax and a li...

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Bibliographic Details
Published in:Journal of transport economics and policy 2017-10, Vol.51 (4), p.225-248
Main Authors: Lucinda, Claudio R., Moita, Rodrigo M. S., Meyer, Leandro G., Ledo, Bruno A.
Format: Article
Language:English
Subjects:
Congestion
Economic theory
Internalization
Public policy
Rotation
Taxation
Traffic
Traffic congestion
Transportation
Welfare
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Summary:Economics prescribes a congestion tax to alleviate the negative effects of traffic congestion. However, traffic congestion is a pervasive problem in cities and a tax is seldom applied. Why? To answer this question, we estimate and simulate the welfare and traffic effects of a congestion tax and a licence plate restriction - a less attractive policy for economists, but far more used in practice. The tax performs better on aggregate. However, while the tax spreads its burden more evenly across the population, the restriction concentrates losses on a smaller group, and has little effect on the rich. These results support both a majority voting and an 'elite capture' argument in favour of the licence plate restriction.
ISSN:0022-5258
1754-5951