Scandinavian Working Papers in Economics

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

No 2016:7: Efficiency and equity of congestion charges

Ida Kristoffersson () and Leonid Engelson ()
Additional contact information
Ida Kristoffersson: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Leonid Engelson: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: Efficiency of congestion charging schemes has been extensively studied in road pricing literature. However, few studies analyze both efficiency and equity of congestion charging schemes. This paper shows the importance of conducting an equity analysis as a complement to an efficiency analysis. Comparing different charging scenarios for Stockholm, the paper shows that changing the location of the charging stations may alter the system from progressive to regressive. In the paper, the most efficient scenario is the least equitable. Indeed, the results of this paper show that moving towards a more efficient scheme design, where amounts are more closely related to congestion level, the charging system turns from progressive to regressive. The reason is the uneven distribution of workplaces and residential areas in Stockholm. Combined with richer socio-economic groups to a larger extent living in the part of Stockholm with more workplaces, this leads to a trade-off between charging for congestion and designing an equitable system. The paper concludes that congestion charging cannot be said to be progressive or regressive per se, rather it varies between cities and even between different scheme designs for the same city. Furthermore, results of the mesoscopic simulations performed in the paper demonstrate that travelers as a whole may benefit from congestion charging even before the use of revenues to compensate the users.

Keywords: Congestion charging; Efficiency; Equity; Welfare effects; Regressive; Progressive; Mesoscopic simulation

JEL-codes: R41; R48

24 pages, March 14, 2016

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