On Subsidising Auto-Commuting

Edward Calthrop

No 566, CESifo Working Paper Series from CESifo

Abstract: Evidence suggests that a considerable proportion of peak period trips are made for purposes other than commuting to or from work.given the different degrees of Hicksian complementarity with the labour market, optimal tax theory suggests that, in a second-best world, different trip purposes should be taxed at different rates. This paper explores this issue and argues for a uniform congestion toll (independent of trip-purpose) combined with a subsidy to auto-commuters. A numerical model suggests that while, in the absence of congestion tolls, commuting subsidies are welfare decreasing, an optimal pricing scheme entails auto-commuters receiving a subsidy of nearly 50 percent of the uniform road toll.

Date: 2001
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