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Comparing the Efficiency of Alternative Policies for Reducing Traffic Congestion

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  • Parry, Ian

    (Resources for the Future)

Abstract

This paper compares the efficiency of a single lane toll, a congestion tax applied uniformly across freeway lanes, a gasoline tax, and a transit fare subsidy at reducing traffic congestion. The model incorporates a variety of conditions required to reach an efficient outcome. These include conditions for the efficient allocation of travel among competing modes, travel at peak versus off-peak periods, and drivers with high and low time costs sorted onto faster and slower freeway lanes. Each policy violates some or all of the efficiency conditions. Under wide parameter scenarios, the single lane toll, gasoline tax, and transit subsidy forgo at least two thirds of the efficiency gains under an "ideal" congestion tax that varies across lanes. In contrast, the uniform congestion tax can achieve more than 90 percent of the efficiency gains, despite failing to separate out drivers with high and low time costs onto different freeway lanes.

Suggested Citation

  • Parry, Ian, 2000. "Comparing the Efficiency of Alternative Policies for Reducing Traffic Congestion," RFF Working Paper Series dp-00-28, Resources for the Future.
  • Handle: RePEc:rff:dpaper:dp-00-28
    as

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    References listed on IDEAS

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    1. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
    2. Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999. "Urban transportation," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999, Elsevier.
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    5. Ian W. H. Parry & Antonio Bento, 2001. "Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 645-671, December.
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    7. 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.
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    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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