What drives gasoline taxes?.

Gasoline taxes are the most important tax on car use. The question naturally arises as to what tax would be adopted by a government that responds to the preferences of the public. To address that issue, we begin with the standard Downsian model, where policy is determined by the median voter. This model predicts that as long as the median voter is not a car user, he wants high taxes on road use and a road capacity that maximizes net tax revenues. When he becomes a driver himself, he wants road user taxes that are lower and only increase to control congestion, as well as more road capacity. We then use panel data for 28 countries and find support for our theory. When the median voter becomes a driver, the gasoline tax drops on average by 20%.

What Drives Gasoline Prices?

Gasoline taxes are the most important tax on car use. The question naturally arises as to what tax would be adopted by a government that responds to the preferences of the public. To address that issue, we begin with the standard Downsian model, where policy is determined by the median voter. This model predicts that as long as the median voter is not a car user, he wants high taxes on road use and a road capacity that maximizes net tax revenues. When he becomes a driver himself, he wants road user taxes that are lower and only increase to control congestion, as well as more road capacity. We then use panel data for 28 countries and find support for our theory. When the median voter becomes a driver, the gasoline tax drops on average by 20%.Gasoline taxes; Median voter theory; Political economy

What drives gasoline taxes?

Gasoline taxes are the most important tax on car use. The question naturally arises as to what tax would be adopted by a government that responds to the preferences of the public. To address that issue, we begin with the standard Downsian model, where policy is determined by the median voter. This model predicts that as long as the median voter is not a car user, he wants high taxes on road use and a road capacity that maximizes net tax revenues. When he becomes a driver himself, he wants road user taxes that are lower and only increase to control congestion, as well as more road capacity. We then use panel data for 28 countries and find support for our theory. When the median voter becomes a driver, the gasoline tax drops on average by 20%.gasoline taxes, median voter theory, political economy

The interactin between tolls and capacity investment in serial and parallel transport networks

The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually be undesirable to allow the tolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.congestion pricing, transport investment, transit traffic

The interaction between tolls and capacity investment in serial and parallel transport networks.

Investment; Serial; Transport; Networks; Working;

Strategic investment and pricing decisions in a congested transport corridor.

This paper studies pricing and investment decisions on a congested transport corridor where the elements of the corridor are controlled by different governments. A corridor can be an interstate highway or railway line, or an inter-modal connection. We model the simplest corridor: two transport links in series, where each of the links is controlled by a different government. Each link is used by transit as well as by local traffic; both links are subject to congestion. We consider a two stage noncooperative game where both governments strategically set capacity in the first stage and play a pricing game in the second stage. Three pricing regimes are distinguished: (i) differentiated tolls between local and transit transport, (ii) one uniform toll on local and transit traffic, and (iii) only the local users can be tolled. Numerical analysis illustrates all theoretical insights. A number of interesting results are obtained. First, transit tolls on the network will be inefficiently high. If only local traffic can be tolled, however, the Nash equilibrium tolls are inefficiently low. Second, raising the toll on transit through a given country by one euro raises the toll on the whole trajectory by less than one euro. Third, higher capacity investment in a given region not only reduces optimal tolls in this region under all pricing regimes but it also increases the transit tolls on the other link of the corridor. Fourth, capacities in the different regions are strategic complements: when one country on the corridor increases transport capacity, it forces the other country to do the same. Fifth, we find interesting interactions between optimal capacities and the set of pricing instruments used: capacity with differentiated tolls is substantially higher than in the case of uniform tolls but overall welfare is lower. Finally, if transit is sufficiently important, it may be welfare improving not to allow any tolling at all, or to only allow the tolling of locals.Investment; Pricing; Decisions; Decision; Transport;

The interaction between tolls and capacity investment in serial and parallel transport networks

The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually be undesirable to allow the tolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.congestion pricing, transport investment, transit traffic

The interaction between tolls and capacity investment in serial and parallel transport networks.

The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually be undesirable to allow the tolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.Congestion pricing; Transport investment; Transit traffic;

Trip chaining: Who wins who loses?

This paper studies how trip chaining (combining commuting and shopping or commuting and child care) affects market competition: in particular, pricing and the equilibrium number of firms as well as welfare. We use a monopolistic competition framework, where firms sell differentiated products as well as offering differentiated jobs to households, who are all located at some distance from the firms. The symmetric equilibria with and without the option of trip chaining are compared. We show analytically that introducing the trip chaining option reduces the profit margin of the firms in the short run, but increases welfare. The welfare gains are, however, smaller than the transport cost savings. In the free-entry long run equilibrium, the number of firms decreases but welfare is higher. A numerical illustration gives orders of magnitude of the different effects.trip chaining ; discrete choice model ; imperfect competition ; wage and price competition

Trip chaining - who wins, who loses?.

In this paper we study how trip chaining affects the pricing and equilibrium number of firms. We use a monopolistic competition model where firms offer differentiated products as well as differentiated jobs to households who are all located at some distance from the firms. Trip chaining means that shopping and commuting can be combined in one trip. The symmetric equilibriums with and without the option of trip chaining are compared. We show analytically that introducing the trip chaining option can, in the short run, only decrease the profit margin of the firms and will increase welfare. The welfare gains are however smaller than the transport cost savings. In the long run, with free entry, the number of firms decreases but welfare with trip chaining possible is still higher than when it is excluded. A numerical illustration gives orders of magnitude of the different effects.Trip chaining; Discrete choice model; General equilibrium model; Imperfect competition; Wage competition;