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Decentralized Road Investment and Pricing in a Congested, Multi-Jurisdictional City: Efficiency With Spillovers

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  • Jan K. Brueckner

Abstract

This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. Optimality also requires the correct population distribution across the city’s zones, conditional on bridge capacities. This outcome is achieved because the user fees function as optimal congestion tolls, a result that follows from the famous self-financing theorem of transportation economics.

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  • Jan K. Brueckner, 2015. "Decentralized Road Investment and Pricing in a Congested, Multi-Jurisdictional City: Efficiency With Spillovers," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(3S), pages 839-854, September.
    • Handle: RePEc:ntj:journl:v:68:y:2015:i:3s:p:839-854
    DOI: 10.17310/ntj.2015.3S.05
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    Cited by:

    1. Mun, Se-il, 2019. "Joint provision of transportation infrastructure," Economics of Transportation, Elsevier, vol. 19(C), pages 1-1.
    2. Glaeser, Edward L. & Ponzetto, Giacomo A.M., 2018. "The political economy of transportation investment," Economics of Transportation, Elsevier, vol. 13(C), pages 4-26.
    3. Fung, Chau Man & Proost, Stef, 2017. "Can we decentralize transport taxes and infrastructure supply?," Economics of Transportation, Elsevier, vol. 9(C), pages 1-19.
    4. De Borger, Bruno & Proost, Stef, 2016. "Can we leave road pricing to the regions? -The role of institutional constraints," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 208-222.
    5. Feder, Christophe, 2018. "Decentralization and spillovers: A new role for transportation infrastructure," Economics of Transportation, Elsevier, vol. 13(C), pages 36-47.
    6. Agrawal, David R. & Zhao, Weihua, 2023. "Taxing Uber," Journal of Public Economics, Elsevier, vol. 221(C).
    7. Bruno Borger & Stef Proost, 2016. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 934-959, October.
    8. Brueckner, Jan K., 2014. "Cordon tolling in a city with congested bridges," Economics of Transportation, Elsevier, vol. 3(4), pages 235-242.

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