 Transport taxes and subsidies in developing countries: The effect of income inequality aversionAlejandro Tirachini and Stef Proost Economics of Transportation, 2021, vol. 25, issue C Abstract: We propose a marginal tax reform model that includes both formal and informal sectors in the economy, traffic externalities (congestion, pollution, crashes and noise) and distributional concerns. The marginal cost of public funds (MCF) is derived for fuel taxes and public transport subsidies. The model is applied to Santiago, Chile. If MCFs are computed only taking economic efficiency into account, a revenue neutral reform within the transport sector suggests increasing the car cost and reducing the bus fare in peak periods, and reducing the car cost and increasing the bus fare in off-peak periods. However, including income inequality aversion leads to suggesting lower bus fares and higher car costs in both peak and off-peak periods, significantly changing the economic assessment of current tax and subsidy instruments. The inclusion of traffic externalities has a large effect on the MCF for fuel tax and a mild effect on MCF for bus subsidy. Keywords: Developing country; Marginal tax reform; Public transport; Subsidy; Fuel tax; Road pricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:25:y:2021:i:c:s2212012221000113 DOI: 10.1016/j.ecotra.2021.100206 Access Statistics for this article Economics of Transportation is currently edited by Mogens Fosgerau and Erik Verhoef More articles in Economics of Transportation from Elsevier |
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