Marginal Social Cost Pricing on a Transportation Network: A Comparison of Second-Best Policies

26 Pages Posted: 26 Jan 2008 Last revised: 15 Oct 2008

See all articles by Elena Safirova

Elena Safirova

Resources for the Future

Sébastien Houde

ETH Zurich

Winston Harrington

Resources for the Future

Date Written: December 1, 2007

Abstract

In this paper we evaluate and compare long-run economic effects of six road-pricing schemes aimed at internalizing social costs of transportation. In order to conduct this analysis, we employ a spatially disaggregated general equilibrium model of a regional economy that incorporates decisions of residents, firms, and developers, integrated with a spatially-disaggregated strategic transportation planning model that features mode, time period, and route choice. The model is calibrated to the greater Washington, DC metropolitan area. We compare two social cost functions: one restricted to congestion alone and another that accounts for other external effects of transportation. We find that when the ultimate policy goal is a reduction in the complete set of motor vehicle externalities, cordon-like policies and variable-toll policies lose some attractiveness compared to policies based primarily on mileage. We also find that full social cost pricing requires very high toll levels and therefore is bound to be controversial.

Keywords: traffic congestion, social cost pricing, land use, welfare analysis, road pricing

JEL Classification: Q53, Q54, R13, R41, R48

Suggested Citation

Safirova, Elena and Houde, Sébastien and Harrington, Winston, Marginal Social Cost Pricing on a Transportation Network: A Comparison of Second-Best Policies (December 1, 2007). RFF Discussion Paper No. 07-52, Available at SSRN: https://ssrn.com/abstract=1085390 or http://dx.doi.org/10.2139/ssrn.1085390

Elena Safirova (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Sébastien Houde

ETH Zurich ( email )

Zurich
Switzerland

Winston Harrington

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
(202) 328-5112 (Phone)
(202) 939-3460 (Fax)

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