Transport Regulation Analysed in a Danish Equilibrium Model

Abstract:

We present a static comparative equilibrium model for road pricing in Denmark.The model analyses the joint problems of the taxation of the congestionexternality and the effects on the labour supply. We combine two regulatoryinstruments, a toll ring and kilometre-based road pricing, with three ways ofrecycling the revenue (eased income taxes, increased subsidies for publictransport and increased tax deductions for commuting). We find that the largestgain would arise from a combination of a toll ring and eased income taxes.Kilometre-based road pricing is less beneficial because the system costs arehigher. The model is inspired by Parry and Bento (2001) and Van Dender(2003) and extended in several ways. Most important are the inclusion of severalregions, more alternative modes of transportation, regionalised laboursupply, modelling of a toll ring, peak/off-peak substitution and the inclusionof system costs.