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Marginal Social Cost Pricing for all Transport modes and the effects of modal budget constraints

Author

Listed:
  • Stef Proost

    (K.U.Leuven, C.E.S., Energy, Transport and Environment)

  • Kurt Van Dender

    (Department of Economics, University of California at Irvine)

Abstract

This paper studies the order of magnitude of the pricing corrections that are needed to implement marginal social cost pricing for all transport modes. With the TRENEN model we study this question for 6 areas in the EU. As marginal social cost pricing may generate important surpluses and deficits for the different modes, we also study the effects of two alternative pricing rules that satisfy budget constraints. We examine the effects of average cost pricing that guarantees a budget balance per mode. The second alternative pricing rule we study is social Ramsey pricing (or marginal social cost pricing with a budget constraint) where we impose a budget constraint at the level of the transport sector. We estimate transport effects and welfare effects of the three pricing rules. We show that average pricing rules may actually do worse than the present pricing rules and that social Ramsey pricing may achieve 50% or more of the maximal welfare gain.

Suggested Citation

  • Stef Proost & Kurt Van Dender, 2003. "Marginal Social Cost Pricing for all Transport modes and the effects of modal budget constraints," Energy, Transport and Environment Working Papers Series ete0311, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    • Handle: RePEc:ete:etewps:ete0311
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    References listed on IDEAS

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    Cited by:

    1. Barros, Victor & Cruz, Carlos Oliveira & Júdice, Tomás & Sarmento, Joaquim Miranda, 2021. "Is taxation being effectively used to promote public transport in Europe?," Transport Policy, Elsevier, vol. 114(C), pages 215-224.
    2. Inge Mayeres & Stef Proost, 2004. "Towards better transport pricing and taxation in Belgium," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 23-43.
    3. Batarce, Marco & Ivaldi, Marc, 2010. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," IDEI Working Papers 659, Institut d'Économie Industrielle (IDEI), Toulouse, revised Apr 2011.
    4. Safirova, Elena A. & Houde, Sébastien & Harrington, Winston, 2008. "Marginal Social Cost Pricing on a Transportation Network: Comparison of Second-Best Policies," RFF Working Paper Series dp-07-52, Resources for the Future.
    5. Tirachini, Alejandro & Hensher, David A. & Rose, John M., 2014. "Multimodal pricing and optimal design of urban public transport: The interplay between traffic congestion and bus crowding," Transportation Research Part B: Methodological, Elsevier, vol. 61(C), pages 33-54.
    6. Mayeres, Inge & Proost, Stef & Dender, Kurt Van, 2005. "The Impacts of Marginal Social Cost Pricing," Research in Transportation Economics, Elsevier, vol. 14(1), pages 211-243, January.
    7. Ioannis Sitzimis, 2021. "An Implementation Proposal Of Innovative Pricing In Greek Coastal Shipping," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 6(2), pages 69-77, September.

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    More about this item

    Keywords

    Transport pricing; optimal taxes; externalities; transport budget constraints;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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