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@article{Hörcher:2020:10.1016/j.regsciurbeco.2019.103503,
author = {Hörcher, D and De, Borger B and Seifu, W and Graham, DJ},
doi = {10.1016/j.regsciurbeco.2019.103503},
journal = {Regional Science and Urban Economics},
pages = {1--19},
title = {Public transport provision under agglomeration economies},
url = {http://dx.doi.org/10.1016/j.regsciurbeco.2019.103503},
volume = {81},
year = {2020}
}
TY - JOUR
AB - The purpose of this paper is to investigate, using both theoretical and numerical analysis, the impact of agglomeration externalities on short-run policy decisions in public transport, i.e. socially optimal pricing, frequency setting, and subsidisation. We develop a simple two-mode model in which commuters can opt for car or public transport use; car use leads to congestion, and public transport is subject to crowding. Allowing for agglomeration externalities, we show the following results. First, if car use is correctly priced for congestion, agglomeration benefits imply substantially lower public transport fares and higher frequencies. They neutralise to some extent the pressure to increase fares to correct the crowding externality. Second, as a consequence, agglomeration benefits justify low cost recovery ratios in public transport. Assuming an agglomeration elasticity of 1.04, a value well within the range of reported elasticities, numerical implementation of the model finds that cost-recovery ratios are 35.8% lower than in the absence of the productivity externality. Third, interestingly, the effect of agglomeration benefits on fares and frequency is much smaller if road use is exogenously under-priced. In this case, any modal shift induced by lower public transport fares has opposing agglomeration effects on the two modes, since agglomeration benefits are not mode-specific.
AU - Hörcher,D
AU - De,Borger B
AU - Seifu,W
AU - Graham,DJ
DO - 10.1016/j.regsciurbeco.2019.103503
EP - 19
PY - 2020///
SN - 0166-0462
SP - 1
TI - Public transport provision under agglomeration economies
T2 - Regional Science and Urban Economics
UR - http://dx.doi.org/10.1016/j.regsciurbeco.2019.103503
UR - https://www.sciencedirect.com/science/article/pii/S0166046219302236?via%3Dihub
UR - http://hdl.handle.net/10044/1/75904
VL - 81
ER -
Transport Strategy Centre
Department of Civil and Environmental Engineering
South Kensington Campus
Imperial College London
London SW7 2AZ - UK
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