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Regional labor markets, commuting, and the economic impact of road pricing

Toon Vandyck and Thomas F. Rutherford

Regional Science and Urban Economics, 2018, vol. 73, issue C, 217-236

Abstract: Cities provide the benefits that come with economic density but often face congested traffic and high unemployment. In this paper, we study economy-wide and distributional implications of congestion pricing in the presence of agglomeration externalities and unemployment. We develop a spatial general equilibrium model to show that indirect effects of time-invariant congestion tolls can lead to welfare losses for low-skilled urban residents by changing commuting patterns of high-skilled workers. Next, we reveal a set of policy designs that improve welfare across space and worker skill levels by combining time-sensitive road pricing, transport network capacity expansions, and toll revenue redistribution.

Keywords: Road pricing; Agglomeration externalities; Second best; General equilibrium; Equity; Regional labor markets (search for similar items in EconPapers)
JEL-codes: H20 J61 R00 D58 D60 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.regsciurbeco.2018.07.005

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