Scandinavian Working Papers in Economics

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

No 2017:3: Cost-benefit analysis of transport improvements in the presence of spillovers, matching and an income tax

Jonas Eliasson () and Mogens Fosgerau ()
Additional contact information
Jonas Eliasson: KTH, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Mogens Fosgerau: Technical University of Denmark, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: This paper addresses the problem of measuring the welfare benefits of a transport improvement. We formulate and analyze a rich spatial model that allows for spillovers, matching and income tax, in a setting with multiple work and residential locations and very general worker heterogeneity. The conventional consumer surplus captures part of the benefits and is calculated based on predictions of changes in travel demand and transport costs. The issue is to determine which socalled wider impacts to add to this. We find that adding the change in total output as a wider impact leads to doublecounting of benefits. The output change due to spillovers should be added, while the output change due to matching is already partly included in the consumer surplus. These results are useful for applied costbenefit analysis of transport policies.

Keywords: Agglomeration; Spillovers; Matching; Cost benefit analysis; Transport policy.

JEL-codes: R40

21 pages, February 7, 2017

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CTS2017-3.pdf PDF-file

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