Scandinavian Working Papers in Economics

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

No 2018:5: Do small cities need more public transport subsidies than big cities?

Maria Börjesson, Chau Man Fung, Stef Proost and Zifei Yan
Additional contact information
Maria Börjesson: VTI
Chau Man Fung: KU Leuven
Stef Proost: KU Leuven
Zifei Yan: CTS - Centre for Transport Studies Stockholm (KTH and VTI), Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: This paper compares the optimal public transport subsidies for a representative bus corridor in a small city (Karlstad) and in a big city (Stockholm) in Sweden. In the smaller city, the optimization of the fare is more important for welfare, whereas in the larger city, the frequency is more important. Moreover, the optimal subsidy is higher in small than in large cities because of larger positive externalities of reduced waiting and schedule delay costs, whereas the negative crowding externalities are larger in the large city. The bus subsidy is important for the income distribution in the small city.

Keywords: Cost-Benefit Analysis; Transport plan; Public transport; Subsidies; External costs; Fares; Frequencies; Bus stops; Redistribution

JEL-codes: R41; R42; R48

25 pages, First version: March 23, 2018. Revised: December 11, 2018.

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