Modelling Social Welfare Effects of Relocation and Road Pricing

Road pricing is a popular congestion reduction strategy. However, there may be wider impacts associated with a road toll. We consider a factor which is sometimes overlooked, namely that workers and firms may choose to change location in response to changes in the travel costs. A spatial equilibrium model is used to analyse suboptimalities in road pricing which may occur if relocations are ignored. We show that such suboptimalities can be substantial. The advantage of the model we use over many existing approaches is that it is easy to implement, and requires very little data.

Keywords: Relocation, Road pricing, Congestion, Spatial equilibrium modelling, LUTI modelling

JEL Classification: R23, R41, R48

Suggested Citation: Suggested Citation

Babri, Sahar and McArthur, David Philip and Thorsen, Inge and Uboe, Jan, Modelling Social Welfare Effects of Relocation and Road Pricing (December 18, 2014). NHH Dept. of Business and Management Science Discussion Paper No. 2014/42, Available at SSRN: https://ssrn.com/abstract=2540500 or http://dx.doi.org/10.2139/ssrn.2540500