Road infrastructure and public bus transport service provision under different funding schemes: A simulation analysis

Abstract

There is a large and still growing literature on road pricing; there is also a large literature on public transport pricing and provision. However, the integration of these subtopics with the subtopic of road capacity provision as a unified topic is very small (Lindsey, 2012). Therefore, we seek to gain a better understanding of the interplay of transport pricing, transport service provision, cost recovery, together with an explicit consideration of equity in a unified fashion. To doso, we carry out a simulation analysis, as theoretical results in second-best contexts are not clean and depend on assumptions on relevant parameters.Under the assumptions of parameters typical of a city like Santiago de Chile, the most relevant conclusions of this research are the following. First, if road infrastructure provision and its pricing are jointly determined, road infrastructure provision is lower when adequately priced through user charges, with car speeds in the peak period increasing very close to free-flow speeds. Second, if user charges are designed to achieve cost recovery of road investments, public bus transport ridership will increase, taking full advantage of social economies of scale. Third, welfare redistribution through transport market interventions is limited. Fourth, if car use is subsidised, most of the benefits, if not all, of subsidising public transport are undone. Fifth, if road pricing were to be implemented in actual urban contexts, reallocation of road space away from private vehicles (even road closure) could become a reality, especially in denser parts of cities.