Regional labor markets, commuting, and the economic impact of road pricing

Publication date: Available online 19 July 2018Source: Regional Science and Urban EconomicsAuthor(s): Toon Vandyck, Thomas F. RutherfordAbstractCities provide the benefits that come with economic density but often face congested traffic and high unemployment. In this paper, we study economy-wide and distributional implications of congestion pricing in the presence of agglomeration externalities and unemployment. We develop a spatial general equilibrium model to show that indirect effects of time-invariant congestion tolls can lead to welfare losses for low-skilled urban residents by changing commuting patterns of high-skilled workers. Next, we reveal a set of policy designs that improve welfare across space and worker skill levels by combining time-sensitive road pricing, transport network capacity expansions, and toll revenue redistribution.
Source: Regional Science and Urban Economics - Category: Science Source Type: research