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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2014/42:
Modelling social welfare effects of relocation and road pricing

Sahar Babri (), David Philip McArthur (), Inge Thorsen () and Jan Ubøe ()

Abstract: 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; (follow links to similar papers)

JEL-Codes: R23; R41; R48; (follow links to similar papers)

31 pages, December 18, 2014

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