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RESEARCH ARTICLE: Value of Time Clustering and the Efficiency of Destination-Based Congestion Pricing

Published online by Cambridge University Press:  17 March 2011

Jorgen Harris  and
Sabina L. Shaikh
Jorgen Harris
Affiliation:
MDRC, New York; formerly at the University of Chicago, where this research was conducted
Sabina L. Shaikh*
Affiliation:
Program on Global Environment and Public Policy Studies, University of Chicago, Chicago, Illinois
*
Sabina L. Shaikh, Lecturer, Program on Global Environment and Public Policy Studies, University of Chicago, 5828 South University Avenue, Chicago, IL 60637; (773) 834-4405; sabina@uchicago.edu
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Abstract

In cities with a hub-and-spoke style transportation system, each individual's transit decision produces externalities contained within a particular transit spoke. When spokes vary in the typical number of drivers, in the capacity of the infrastructure, or in the average income of commuters, the efficient tax to charge drivers to minimize the externalities may vary across spokes. The size and importance of this variation are evaluated by comparing the potential welfare benefits of a congestion tax in Chicago, which is different rates for different highways to a tax that is a single rate. Using the 2000 United States Census Public Use Microdata to estimate wage distribution and data from the Illinois Department of Transportation on vehicle speed and road occupancy, this research provides estimates of optimal taxes for each neighborhood and for the city in aggregate. Results show that optimal tax rates vary substantially, from a low of $6.75 per vehicle per day to a high of $16.50, but that the overall welfare difference between charging a neighborhood-specific tax and charging a citywide tax is minor. This occurs because the number of drivers changes very slowly at high tax rates, meaning that a wide range of taxes can produce nearly optimal results in terms of welfare. An optimal congestion tax of $11.25 per day is estimated to result in 400,000 fewer downtown commutes per day, reducing pollution costs valued at $2.9 million per year.

Environmental Practice 13:1–10 (2011)

Type
Features
Information
Environmental Practice , Volume 13 , Issue 1 , March 2011 , pp. 28 - 37
Copyright
Copyright © National Association of Environmental Professionals 2011

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