How Should Passenger Travel in Mexico City Be Priced?
Ian W. H. Parry
Resources for the Future
Govinda R. Timilsina
World Bank - Development Research Group
June 15, 2008
RFF Discussion Paper No. 08-17
This paper uses an analytical-simulation model to examine the optimal extent and welfare effects of pricing reforms for passenger transportation in Mexico City. The model incorporates travel by auto, microbus, public bus, and rail, plus externalities from local and global air pollution, traffic congestion, and road accidents. In our benchmark case, the optimal gasoline tax is $2.72 (29.6 pesos) per gallon, or 16 times the current tax. However, a per-mile toll would reduce traffic congestion, the largest externality, more directly, and we put the optimized auto toll at 20.3 cents per mile. Tolls should also be imposed on microbuses even though the welfare gains are relatively modest, as are those from reforming public transit fares.
Number of Pages in PDF File: 49
Keywords: gasoline taxes, mileage tolls, transit subsidy, pollution, congestion, Mexico City, welfare effects
JEL Classification: R48, H21, H23working papers series
Date posted: August 20, 2008 ; Last revised: December 4, 2008
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