IDEAS home Printed from https://ideas.repec.org/p/cdl/itsrrp/qt7r64t085.html
   My bibliography  Save this paper

Can Rebates Foster Equity in Congestion Pricing Programs?

Author

Listed:
  • Sallee, James M.
  • Tarduno, Matthew A.

Abstract

Congestion pricing improves economic efficiency, but it may lead to inequitable outcomes. A key policy priority in California is identifying ways to avoid the hardship of congestion pricing on low income or other vulnerable populations. This study uses data from a congestion pricing experiment in the Seattle metro area to examine the feasibility of using revenue from congestion pricing to compensate those harmed by the policy. Results indicate that the initial burden of congestion pricing is highly inequitable, with the lowest income drivers paying an average of 7 percent of their weekly income in congestion charges. There are also considerable differences in burdens within income groups. We show that policymakers face a tradeoff in ameliorating these two types of unequal burdens. Returning an equal fraction of the toll revenue to all drivers can make a policy progressive on average, but doing so leaves many drivers either overcompensated or under-compensated. We then show that while compensation packages based on basic demographic information could improve targeting, many low-income drivers would be left with large proportional burdens because of the fundamental difficulty in predicting individual-level tax burdens. Survey data on travel behavior from Seattle and California metro areas show that the difficulty of designing equitable transfers would be similar in the California metro areas most likely to consider adopting some form of congestion pricing.

Suggested Citation

  • Sallee, James M. & Tarduno, Matthew A., 2022. "Can Rebates Foster Equity in Congestion Pricing Programs?," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt7r64t085, Institute of Transportation Studies, UC Berkeley.
  • Handle: RePEc:cdl:itsrrp:qt7r64t085
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/7r64t085.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Bureau, Benjamin & Glachant, Matthieu, 2008. "Distributional effects of road pricing: Assessment of nine scenarios for Paris," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(7), pages 994-1007, August.
    3. Meredith Fowlie & Jeffrey M. Perloff, 2013. "Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation?," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1640-1652, December.
    4. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(2), pages 139-154, June.
    5. James M. Sallee, 2019. "Pigou Creates Losers: On the Implausibility of Achieving Pareto Improvements from Efficiency-Enhancing Policies," NBER Working Papers 25831, National Bureau of Economic Research, Inc.
    6. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
    7. Eliasson, Jonas & Mattsson, Lars-Göran, 2006. "Equity effects of congestion pricing: Quantitative methodology and a case study for Stockholm," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(7), pages 602-620, August.
    8. Lisa Schweitzer & Brian Taylor, 2008. "Just pricing: the distributional effects of congestion pricing and sales taxes," Transportation, Springer, vol. 35(6), pages 797-812, November.
    9. Georgina Santos & Laurent Rojey, 2004. "Distributional impacts of road pricing: The truth behind the myth," Transportation, Springer, vol. 31(1), pages 21-42, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georgina Santos & Erik Verhoef, 2011. "Road Congestion Pricing," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 23, Edward Elgar Publishing.
    2. Albrecht, Maxwell & Brown, Anne & Lederman, Jaimee & Taylor, Brian D. & Wachs, Martin, 2017. "The Equity Challenges and Outcomes of California County Transportation Sales Tax," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt39q2758w, Institute of Transportation Studies, UC Berkeley.
    3. Taylor, Brian D. PhD & Kalauskas, Rebecca MA & Iseki, Hiroyuki, 2010. "Addressing Equity Challenges to Implementing Road Pricing," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt83r073fp, Institute of Transportation Studies, UC Berkeley.
    4. Ortega, Alejandro & Vassallo, José Manuel & Pérez, Juan Ignacio, 2021. "Modelling some equality and social welfare impacts of road tolling under conditions of traffic uncertainty," Research in Transportation Economics, Elsevier, vol. 88(C).
    5. van Doorslaer, Eddy & Wagstaff, Adam & van der Burg, Hattem & Christiansen, Terkel & Citoni, Guido & Di Biase, Rita & Gerdtham, Ulf-G. & Gerfin, Mike & Gross, Lorna & Hakinnen, Unto, 1999. "The redistributive effect of health care finance in twelve OECD countries," Journal of Health Economics, Elsevier, vol. 18(3), pages 291-313, June.
    6. Jonathan Colmer & Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner, 2020. "Does pricing carbon mitigate climate change? Firm-level evidence from the European Union emissions trading scheme," CEP Discussion Papers dp1728, Centre for Economic Performance, LSE.
    7. Carolyn Fischer & William A. Pizer, 2019. "Horizontal Equity Effects in Energy Regulation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 209-237.
    8. Aleksandar Zaklan, 2023. "Coase and Cap-and-Trade: Evidence on the Independence Property from the European Carbon Market," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 526-558, May.
    9. Li, Zheng & Hensher, David A., 2012. "Congestion charging and car use: A review of stated preference and opinion studies and market monitoring evidence," Transport Policy, Elsevier, vol. 20(C), pages 47-61.
    10. Henrik Jordahl & Luca Micheletto, 2005. "Optimal Utilitarian Taxation and Horizontal Equity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 681-708, October.
    11. Nolan, Matt, 2018. "Horizontal and Vertical Equity in the New Zealand Tax-Transfer System: 1988-2013," Working Paper Series 7657, Victoria University of Wellington, Chair in Public Finance.
    12. Robert W. Hahn & Robert N. Stavins, 2011. "The Effect of Allowance Allocations on Cap-and-Trade System Performance," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 267-294.
    13. Alm, James, 1996. "What Is an "Optimal'"Tax System?," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(1), pages 117-133, March.
    14. Jean-Yves Duclos & Peter Lambert, "undated". "A Normative Approach to Measuring Classical Horizontal Inequity," Discussion Papers 97/3, Department of Economics, University of York.
    15. J. Richard Aronson & Peter J. Lambert & Donald R. Trippeer, 1999. "Estimates of the Changing Equity Characteristics of the U.S. Income Tax with International Conjectures," Public Finance Review, , vol. 27(2), pages 138-159, March.
    16. Louis Kaplow, 1989. "Government Relief for Risk Associated with Government Action," NBER Working Papers 3006, National Bureau of Economic Research, Inc.
    17. Erlend Bø & Peter Lambert & Thor Thoresen, 2012. "Horizontal inequity under a dual income tax system: principles and measurement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 625-640, October.
    18. Baudry, Marc & Faure, Anouk & Quemin, Simon, 2021. "Emissions trading with transaction costs," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    19. James Alm, 2017. "Is Economics Useful for Public Policy?," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 835-854, April.
    20. Rouhani, Omid M. & Knittel, Christopher R. & Niemeier, Debbie, 2014. "Road Supply in Central London: Addition of an Ignored Social Cost," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 53(1).

    More about this item

    Keywords

    Social and Behavioral Sciences; Congestion pricing; low income groups; social equity; vehicle miles of travel; travel behavior; incentives; traffic data;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:itsrrp:qt7r64t085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/itucbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.