Should the Portuguese Toll-Free Highways Remain Toll Free?

Alfredo Marvao Pereira () and Jorge Miguel Andraz ()

No 37, Working Papers from Department of Economics, College of William and Mary

Abstract: This paper provides empirical evidence on the economic and budgetary effects of the recent investments in toll-free highways in Portugal, the so-called SCUTS, in an effort to bring some clarity to the current policy debate on these highways. This debate is centered on the issue of the financial sustainability of these highways and is related to the fact that their financing involves payments of shadow tolls from the public budget to the private firms that constructed and operate them. In this context, the introduction of tolls has been suggested. Our results deal directly with the conceptual adequacy and the financial necessity of such tolls. Our first conclusion is that investments in SCUTS have positive economic effects in all regions of the country. Furthermore, we find that regional spillovers account for about three-quarters of the total effects of these investments. A paradigmatic case is Lisbon, a region that captures the greatest share of these effects without any investments having actually occurred in the region itself. The importance of spillovers suggests that the conceptual argument for the introduction of tolls is weak. Our second conclusion is that investments in SCUTS do not seem to generate problems of financial sustainability for the public budget. We estimate that for all SCUTS, the equilibrium tax rate, i.e., the rate that would balance the tax revenues induced by these highways and the shadow tolls the government has to pay, is lower than the effective tax rate for the economy. Accordingly, the introduction of tolls is not necessary from a financial perspective.

Keywords: road infrastructures; regional spillovers; financial sustainability; SCUTS; Portugal. (search for similar items in EconPapers)
JEL-codes: C32 H54 R53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-ure
Date: 2006-08-11
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