Congestion pricing, infrastructure investment and redistribution

Antonio Russo

MPRA Paper from University Library of Munich, Germany

Abstract: We study congestion pricing by a government that has redistributive concerns, in the presence of optimal income taxation. Individuals differ in (unobservable) earning ability and consumption technology for commodities using a congestible network (e.g. roads, Internet). We find, assuming separable preferences, that when efficiency of consumption technology is either invariant or postively correlated with earning ability, low ability individuals should face higher marginal congestion charges than high ability ones. Moreover, reducing congestion (by raising charges or expanding network capacity) enables government to increase redistribution. We also find that means tested congestion pricing may be necessary to implement the second-best allocation.

Keywords: congestion pricing; income taxation; redistribution; infrastructure investment (search for similar items in EconPapers)
JEL-codes: H21 H23 H41 H54 R41 (search for similar items in EconPapers)
Date: 2011-02-15
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28932

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