Working paper

Pricing of Transport Networks, Redistribution and Optimal Taxation

Antonio Russo

Abstract

We study optimal pricing of roads and public transport in presence of nonlinear in- come taxation. Individuals are heterogeneous in unobservable earning ability. Optimal transport tarifs depend on time costs of travel and work schedule adjustments (days and hours worked per day) as a response to commuting costs. We find that discounts for low income individuals are optimal only if the time cost of a trip is small enough. Lower travel time costs facilitate screening: therefore, redistribution provides an additional motive for congestion pricing. Finally, we investigate the desirability of means-testing of transport tarifs.

Keywords

road pricing; public transport pricing; income taxation; meanstesting;

JEL codes

  • H21: Efficiency • Optimal Taxation
  • H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies
  • R41: Transportation: Demand, Supply, and Congestion • Safety and Accidents • Transportation Noise

Reference

Antonio Russo, Pricing of Transport Networks, Redistribution and Optimal Taxation, TSE Working Paper, n. 12-353, November 2012.

See also

Published in

TSE Working Paper, n. 12-353, November 2012