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The Political Economy of an Optimal Congestion Tax: An Empirical Investigation

Author

Listed:
  • Claudio R. Lucinda
  • Rodrigo Moita

Abstract

Despite widely prescribed by economists, a congestion tax is seldom used in practice. Why? This paper combines a structural econometric model with a simulation algorithm to estimate an optimal congestion tax and investigate its political acceptance. Results for Sao Paulo show the tax to be 2 USD per trip. Policy simulations indicate that (i) commuters that switch to the public transportation bears the largest share of the tax burden and (ii) revenue recycling is essential for the policy to be accepted. Skepticism about the use of tax revenues is the likely cause for the low use of the congestion tax.

Suggested Citation

  • Claudio R. Lucinda & Rodrigo Moita, 2019. "The Political Economy of an Optimal Congestion Tax: An Empirical Investigation," Working Papers, Department of Economics 2019_10, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2019wpecon10
    as

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    File URL: http://www.repec.eae.fea.usp.br/documentos/Lucinda_Moita_10WP.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    pigouvian tax; urban transportation; congestion; urban toll;
    All these keywords.

    JEL classification:

    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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