Scandinavian Working Papers in Economics
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CTS - Centre for Transport Studies Stockholm (KTH and VTI)
CTS - Centre for Transport Studies Stockholm (KTH and VTI) CTS - Centre for Transport Studies Stockholm (KTH and VTI)
Working papers in Transport Economics

No 2015:19:
Should buses still be subsidized in Stockholm?

Maria Börjesson (), Chau Man Fung () and Stef Proost

Abstract: Many public transport services are heavily subsidized. One of the main justifications of this is the expected beneficial effect on road congestion. Stockholm introduced congestion pricing in 2006 and the effects on car and public transport demand were carefully monitored. This change in prices provides unique estimates on price- and cross-price elasticities. This paper uses these data to model the optimal pricing, frequency, bus size and number of bus lanes for a corridor in the presence of congestion pricing of cars. Results show that the subsidies for peak bus trips are indeed too high. However, the major welfare benefits of the reform are due to a decrease in frequencies during the off-peak period and the use of larger buses.

Keywords: Public transport; Bus fares; Bus lanes; Bus frequency; Subsidies; Congestion pricing; (follow links to similar papers)

JEL-Codes: D61; H54; R41; R48; (follow links to similar papers)

36 pages, January 25, 2016

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