Scandinavian Working Papers in Economics

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

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

Sahar Babri (), David Philip McArthur (), Inge Thorsen () and Jan Ubøe ()
Additional contact information
Sahar Babri: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
David Philip McArthur: Urban Big Data Centre, University of Glasgow, Postal: University of Glasgow, Urban Big Data Centre, 7 Lilybank Gardens, Glasgow, G12 8RZ, UK
Inge Thorsen: Stord/Haugesund University College, Postal: Stord/Haugesund University College, Bjørnsonsgate 45, 5528 Haugesund, Norway
Jan Ubøe: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

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

JEL-codes: R23; R41; R48

31 pages, December 18, 2014

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