Agriculture and Rural Development

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Programs > Agriculture and Rura... > ImagebankContents

Revenue recycling and the welfare effects of road pricing, Volume 1

Author:	Parry, Ian W.H.; Bento, Antonio Miguel R.;	Collection Title:	Policy, Research working paper ; no. WPS 2253
Date Stored:	2000/01/11	Document Date:	1999/12/31
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	Finance	Report Number:	WPS2253
Sub Sectors:	Financial Adjustment	SubTopics:	Environmental Economics & Policies; Economic Theory & Research; Banks & Banking Reform; Labor Policies; Municipal Financial Management; Public Sector Economics
Volume No:	1

Summary: The authors explore the interaction between taxes on work-related traffic congestion and preexisting distortionary taxes in the labor market. A congestion tax raises the overall costs of commuting to work and discourages labor force participation at the margin when revenues are returned in lump-sum transfers. The resulting efficiency loss in the labor market can be larger that the Pigouvian efficiency gains from internalizing the congestion externality. By contrast, if congestion tax revenues are used to reduce labor taxes, the net impact on the labor supply is positive and the efficiency gain in the labor market can raise the overall welfare gains of the congestion tax by as much as 100 percent. Recycling congestion tax revenues in public transit subsidies produces a positive, but smaller, impact on the labor supply. In short, the authors' results indicate that the presence of preexisting tax distortions, and the form of revenue recycling, can crucially affect the size - and possibly even the sign - of the welfare effect of road pricing schemes. The efficiency gains from recycling congestion tax revenues in other tax reductions can amount to several times the Pigouvian welfare gains from congestion reduction.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 36 pages	Official version*	2.52 (approx.)
	Text	Text version**


Light-Weight Documents Lighter (less MB) documents which may or may not be the final, official version
File Type		Description	File Size (mb)

	PDF 31 pages	WPS2253	0.09

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/QATDVOJCU0