Congestion and tax competition in a parallel network

Bruno De Borger, Stef Proost and K. van Dender

Working Papers from University of Antwerp, Faculty of Business and Economics

Abstract: The purpose of this paper is to study tax competition on a parallel road network when different governments have tolling authority on different links of the network. Reflecting many current situations in Europe, each link is used by both local and transit traffic, and transit has a choice of route. Each government maximises the surplus of local users plus total tax revenues in controlling local and transit transport. Three types of tolling systems are considered: (i) toll discrimination between local traffic and transit, (ii) uniform tolls on local and transit transport, (iii) local tolls only. The results suggest that the welfare effects of introducing transit tolls are large, but that differentiation of tolls between local and transit transport as compared to uniform tolls does not yield large welfare differences. Moreover, the welfare effects of coordination between countries are relatively small in comparison with the welfare gains of tolling transit. Numerical application of the model further illustrates the effects of different transit shares and explicitly considers the role of asymmetries between countries. Higher transit shares strongly raise the Nash equilibrium transit toll and slightly decrease local tolls. With asymmetric demands, the welfare gains of introducing differentiated tolling rise strongly for the country with lower local demand.

Keywords: Congestion pricing; Transit traffic (search for similar items in EconPapers)
JEL-codes: H23 H71 R41 R48 (search for similar items in EconPapers)
Pages: 51 pages
New Economics Papers: this item is included in nep-eec, nep-geo, nep-net and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Congestion and tax competition in a parallel network (2005)
Working Paper: Congestion and tax competition in a parallel network (2004)
Working Paper: Congestion and tax competition in a parallel network (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2004003

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