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Privatization and PPPS in transportation infrastructure: Network effects of increasing user fees

Daniel Albalate () and Germà Bel ()
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Daniel Albalate: Faculty of Economics, University of Barcelona

No 201110, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Problem: Public, private, partnerships in transport infrastructure characteristically increase user fees. PPP projects are usually considered as isolated facilities, even though in most cases they belong to a network. Hence, the network effects of the use of PPPs and increased tolls tend to be neglected. Purpose: We aim to identify the network effects of the use of PPPs and increased user tolls in road infrastructure. We empirically examine and demonstrate network effects due to network infrastructure pricing, and draw lessons for users and planners. To do so, we focus on the effects of pricing on users of alternative roads, paying special attention to traffic composition and safety. Methods: We study the increases in user tolls on motorways due to the use of PPPs in the US. To show the effects of user tolls, we also examine micro data for toll motorways in Spain and assess the consequences of pricing and PPP design for the Spanish road network. Results and conclusions: Among other things, the monetization of motorways is associated with an increase in toll levels that has consequences for their users, and also for the rest of the sections of the network. We show that pricing high-quality roads without considering their role inside the road network increases volumes of heavy traffic and accidents on non-tolled lower-quality alternative roads. Analyzing the network as a whole, and not just the PPP section, we see that toll increases due to PPPs have negative consequences in terms of efficiency, traffic composition, and road safety. Takeaway for practice: Policy makers who decide to impose tolls on the best roads should invest more in maintenance and quality elsewhere in the system in order to improve safety in the adjacent alternative routes which receive traffic diverted from the tolled motorway. An alternative for regulators is internalizing accident externalities by lowering tolls to improve safety in the corridor.

Keywords: Private-Public-Partnerships; Monetization; Toll Roads; Networks. JEL classification: (search for similar items in EconPapers)
Date: 2011-06, Revised 2011-06
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