Subsidy

John Preston

A chapter in Elgar Encyclopedia of Transport and Society, 2025, pp 378-379 from Edward Elgar Publishing

Abstract: Various forms of subsidy and grants are reviewed, along with both the arguments and counter-arguments for the subsidisation of transport. Due to user economies of scale (the Mohring effect), there appears to be a strong first-best case for subsidising regular, scheduled urban public transport. Second-best arguments increase the scope for subsidisation, including transport serving rural, peripheral areas and supporting demand-responsive transport. In practice, in all but the highest income countries, budget constraints will mean optimal subsidy levels may not be possible, but forms of cross-subsidy and price discrimination may be practiced.

Keywords: Subsidy; Grant; Cross-subsidy; Mohring effect; First-best pricing; Second-best pricing (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035330515
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