Public transport provision under agglomeration economies
Bruno De Borger,
Woubit Seifu and
Daniel J. Graham
Regional Science and Urban Economics, 2020, vol. 81, issue C
The purpose of this paper is to investigate, using both theoretical and numerical analysis, the impact of agglomeration externalities on short-run policy decisions in public transport, i.e. socially optimal pricing, frequency setting, and subsidisation. We develop a simple two-mode model in which commuters can opt for car or public transport use; car use leads to congestion, and public transport is subject to crowding. Allowing for agglomeration externalities, we show the following results. First, if car use is correctly priced for congestion, agglomeration benefits imply substantially lower public transport fares and higher frequencies. They neutralise to some extent the pressure to increase fares to correct the crowding externality. Second, as a consequence, agglomeration benefits justify low cost recovery ratios in public transport. Assuming an agglomeration elasticity of 1.04, a value well within the range of reported elasticities, numerical implementation of the model finds that cost-recovery ratios are 35.8% lower than in the absence of the productivity externality. Third, interestingly, the effect of agglomeration benefits on fares and frequency is much smaller if road use is exogenously under-priced. In this case, any modal shift induced by lower public transport fares has opposing agglomeration effects on the two modes, since agglomeration benefits are not mode-specific.
Keywords: Agglomeration; Public transport; Congestion; Crowding; Subsidies (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:81:y:2020:i:c:s0166046219302236
Access Statistics for this article
Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou
More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().