Should Urban Transit Subsidies Be Reduced?

Ian Parry and Kenneth Small ()

American Economic Review, 2009, vol. 99, issue 3, 700-724

Abstract: This paper derives empirically tractable formulas for the welfare effects of fare adjustments in passenger peak and off-peak rail and bus transit, and for optimal pricing of those services. The formulas account for congestion, pollution, accident externalities, scale economies, and agency adjustment of transit service offerings. We apply them using parameter values for Washington (DC), Los Angeles, and London. The results support the efficiency of the large current fare subsidies; even starting with fares at 50 percent of operating costs, incremental fare reductions are welfare improving in almost all cases. These findings are robust to alternative assumptions and parameters. (JEL L92, R41, R42, R48)

JEL-codes: L92 R41 R42 R48 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/aer.99.3.700
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Citations: View citations in EconPapers (201)

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Related works:
Working Paper: Should Urban Transit Subsidies Be Reduced? (2007)
Working Paper: Should Urban Transit Subsidies Be Reduced? (2007)
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