The political economy of public transport pricing and supply decisions

Bruno De Borger and Stef Proost

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

Abstract: This paper studies the political economy of public transport pricing and quality decisions in a hypothetical two-region federation. In each region there are two types of people: people not owning a car using only public transport, and car owners that demand both public transport and car trips. Each group may be a majority in the region and may also travel in the other region. Under regional decision-making, the political process may result in very low public transport fares, even if car owners are a large majority of the population. Cost recovery always improves with the share of outside users. Second, imposing a zero deficit constraint on regional public transport operators implements the second-best welfare optimum. Third, decentralized decision making leads to higher fares and better cost recovery. Our findings are consistent with very large public transport subsidies in Europe, and with the tendency towards decentralization of public transport policy-making.

Keywords: Public transport pricing; Tax competition; Federalism (search for similar items in EconPapers)
JEL-codes: D62 H23 R41 R48 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-05
New Economics Papers: this item is included in nep-cdm, nep-pol, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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https://repository.uantwerpen.be/docman/irua/27fdf6/7787ff1c.pdf (application/pdf)

Related works:
Journal Article: The political economy of public transport pricing and supply decisions (2015)
Working Paper: The political economy of public transport pricing and supply decisions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2015010

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