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

Claudio Lucinda and Rodrigo Moita ()

No 2019_10, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

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.

Keywords: pigouvian tax; urban transportation; congestion; urban toll (search for similar items in EconPapers)
JEL-codes: L91 L92 R41 (search for similar items in EconPapers)
Date: 2019-02-19
New Economics Papers: this item is included in nep-pub, nep-tre and nep-ure
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