Should Urban Transit Subsidies Be Reduced?

Ian Parry and Kenneth Small ()

RFF Working Paper Series from Resources for the Future

Abstract: This paper derives intuitive and empirically useful formulas for the optimal pricing of passenger transit and for the welfare effects of adjusting current fare subsidies, for peak and off-peak urban rail and bus systems. The formulas are implemented based on a detailed estimation of parameter values for the metropolitan areas of Washington (D.C.), Los Angeles, and London. Our analysis accounts for congestion, pollution, and accident externalities from automobiles and from transit vehicles; scale economies in transit supply; costs of accessing and waiting for transit service as well as service crowding costs; and agency adjustment of transit frequency, vehicle size, and route network to induced changes in demand for passenger miles. The results support the efficiency case for the large fare subsidies currently applied across mode, period, and city. In almost all cases, fare subsidies of 50 percent or more of operating costs are welfare improving at the margin, and this finding is robust to alternative assumptions and parameters.

Keywords: transit subsidies; scale economies; traffic congestion; welfare effects (search for similar items in EconPapers)
JEL-codes: H21 R48 (search for similar items in EconPapers)
Date: 2007-07-16
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.rff.org/RFF/documents/RFF-DP-07-38.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.rff.org/RFF/documents/RFF-DP-07-38.pdf [301 Moved Permanently]--> https://www.rff.org/RFF/documents/RFF-DP-07-38.pdf)

Related works:
Journal Article: Should Urban Transit Subsidies Be Reduced? (2009)
Working Paper: Should Urban Transit Subsidies Be Reduced? (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rff:dpaper:dp-07-38

Access Statistics for this paper

More papers in RFF Working Paper Series from Resources for the Future Contact information at EDIRC.
Bibliographic data for series maintained by Resources for the Future ().