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Pricing Urban Congestion

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Author Info
Parry, Ian W.H. () (Resources for the Future)

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Abstract

This paper reviews literature on the optimal design of pricing policies to reduce urban automobile congestion. The implications of a range of complicating factors are considered, such as traffic bottlenecks, constraints on which roads and freeway lanes in the road network can be priced, driver heterogeneity, private toll operators, other externalities besides congestion, and interactions between congestion taxes and the broader fiscal system. We also briefly discuss the incidence of congestion taxes and experience with this policy in the United States and elsewhere. Although the economics literature on congestion pricing has advanced considerably over the last 20 years, research is still needed on the empirical measurement of second-best efficient tolls for urban centers and whether alternative design features have substantial implications for efficiency. More research is also needed on the design of schemes to promote feasibility by compensating adversely affected groups with minimal loss in economic efficiency.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-08-35.

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Date of creation: 24 Nov 2008
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Handle: RePEc:rff:dpaper:dp-08-35

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Related research
Keywords: traffic congestion; externality; peak-period fee; congestion toll incidence;

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Find related papers by JEL classification:
R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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  1. Jonathan Leape, 2006. "The London Congestion Charge," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 157-176, Fall.
  2. Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-30, May. [Downloadable!] (restricted)
    Other versions:
  3. Georgina Santos & Gordon Fraser, 2006. "Road pricing: lessons from London," Economic Policy, CEPR, CES, MSH, vol. 21(46), pages 263-310, 04. [Downloadable!] (restricted)
  4. Mun, Se-il, 1994. "Traffic jams and the congestion toll," Transportation Research Part B: Methodological, Elsevier, vol. 28(5), pages 365-375, October. [Downloadable!] (restricted)
  5. Safirova, Elena & Gillingham, Kenneth & Houde, Sébastien, 2007. "Measuring marginal congestion costs of urban transportation: Do networks matter?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(8), pages 734-749, October. [Downloadable!] (restricted)
    Other versions:
  6. Arnott, Richard & Kraus, Marvin, 1998. "When are anonymous congestion charges consistent with marginal cost pricing?," Journal of Public Economics, Elsevier, vol. 67(1), pages 45-64, January. [Downloadable!] (restricted)
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  7. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September. [Downloadable!] (restricted)
  8. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November. [Downloadable!] (restricted)
  9. Ramjerdi, Farideh & Minken, Harald & Østmoe, Knut, 2004. "10. Norwegian Urban Tolls," Research in Transportation Economics, Elsevier, vol. 9(1), pages 237-249, January. [Downloadable!] (restricted)
  10. Verhoef, Erik T., 2002. "Second-best congestion pricing in general networks. Heuristic algorithms for finding second-best optimal toll levels and toll points," Transportation Research Part B: Methodological, Elsevier, vol. 36(8), pages 707-729, September. [Downloadable!] (restricted)
  11. Small, K.A. & Chu, X., 1997. "Hypercongestion," Papers 97-98-12, California Irvine - School of Social Sciences.
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  12. Small, Kenneth A., 1983. "The incidence of congestion tolls on urban highways," Journal of Urban Economics, Elsevier, vol. 13(1), pages 90-111, January. [Downloadable!] (restricted)
  13. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May. [Downloadable!] (restricted)
  14. Ian W.H. Parry & Kenneth A. Small, 2007. "Should Urban Transit Subsidies Be Reduced?," Working Papers 060723, University of California-Irvine, Department of Economics. [Downloadable!]
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  15. Noland, Robert B., 2001. "Relationships between highway capacity and induced vehicle travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(1), pages 47-72, January. [Downloadable!] (restricted)
  16. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November. [Downloadable!] (restricted)
  17. Robin Lindsey, 2006. "Do Economists Reach A Conclusion on Road Pricing? The Intellectual History of an Idea," Econ Journal Watch, Atlas Economic Research Foundation, vol. 3(2), pages 292-379, May. [Downloadable!]
  18. May, A. D. & Liu, R. & Shepherd, S. P. & Sumalee, A., 2002. "The impact of cordon design on the performance of road pricing schemes," Transport Policy, Elsevier, vol. 9(3), pages 209-220, July. [Downloadable!] (restricted)
  19. Houde, Sébastien & Safirova, Elena A. & Harrington, Winston, 2007. "Washington START Transportation Model," Discussion Papers dp-07-43, Resources For the Future. [Downloadable!]
  20. Small, K.A. & Gomez-Ibanez, J.A., 1996. "Urban Transportation," Papers 95-96-4, California Irvine - School of Social Sciences.
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  21. C. Robin Lindsey & Erik T. Verhoef, 1999. "Congestion Modelling," Tinbergen Institute Discussion Papers 99-091/3, Tinbergen Institute. [Downloadable!]
  22. Parry, I. W. H., 2002. "Comparing the efficiency of alternative policies for reducing traffic congestion," Journal of Public Economics, Elsevier, vol. 85(3), pages 333-362, September. [Downloadable!] (restricted)
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  23. Richard Arnott & Tilmann Rave & Ronnie Schöb, 2005. "Alleviating Urban Traffic Congestion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012197, January.
  24. May, A. D. & Milne, D. S., 2000. "Effects of alternative road pricing systems on network performance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(6), pages 407-436, August. [Downloadable!] (restricted)
  25. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(4), pages 645-71, December. [Downloadable!] (restricted)
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