Financing Road Infrastructure by Savings in Congestion Costs: A CGE Analysis

Working Paper No. 579-00

19 Pages Posted: 27 Jun 2000

See all articles by Klaus Conrad

Klaus Conrad

University of Mannheim - Department of Economics

S. Heng

Baden-Wuerttemberg Cooperative State University

Date Written: May 2000

Abstract

Division of labor, outsourcing in manufacturing and just-in-time production require the provision of a good and sufficient road infrastructure system. The society is used to mobility, preference for it even increases, and the full benefit of competition can only be realized if special distances can be overcome at low cost of transportation. Since the 1970's, however, the negative aspects of an intensive extension of road infrastructure has dominated the political decision process. The objective of this paper is to model the aspects of bottlenecks in road infrastructure, of congestion costs and of the effect of investment in infrastructure in a computable general equilibrium framework. A long-run business as usual simulation will show how congestion and its cost will develop over time. Given the necessity to act we will raise the fuel tax to partly finance infrastructure investment. We will then compare the cost of the addition in infrastructure with the savings in congestion costs in order to see whether this policy measure is self-financing.

Keywords: Traffic, congestion, infrastructure, road, computable general equilibrium

JEL Classification: R41, R42, R15,H54, D58

Suggested Citation

Conrad, Klaus and Heng, Stefan, Financing Road Infrastructure by Savings in Congestion Costs: A CGE Analysis (May 2000). Working Paper No. 579-00. Available at SSRN: https://ssrn.com/abstract=224809 or http://dx.doi.org/10.2139/ssrn.224809

Klaus Conrad (Contact Author)

University of Mannheim - Department of Economics ( email )

Seminargebaeude A5
68131 Mannheim
Germany
+49 621 1811896 (Phone)
+49 621 1811893 (Fax)

Stefan Heng

Baden-Wuerttemberg Cooperative State University ( email )

Coblitzallee 1-9
Mannheim, Baden-Wuerttemberg 68163
Germany
+49 621 4105 1183 (Phone)
+49 621 4105 1245 (Fax)

HOME PAGE: http://www.mannheim.dhbw.de/profile/heng

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