Road pricing with complications

The rationale for congestion charges is that by internalising the marginal external congestion cost, they restore efficiency in the transport market. In the canonical model underlying this view, congestion is a static phenomenon, users are taken to be homogenous, there is no travel time risk, and a highly stylised model of congestion is used. The simple analysis also ignores that real pricing schemes are only rough approximations to ideal systems and that inefficiencies in related markets potentially affect the case for congestion charges. The canonical model tends to understate the marginal external congestion cost because it ignores user heterogeneity and trip timing inefficiencies. With respect to the relevance of interactions between congestion and congestion charges and tax distortions and distributional concerns, recent insights point out that there is no general case for modifying charges for such interactions. Therefore the simple Pigouvian rule remains a good first approximation for the design of road charging systems.     

Estimating the agglomeration benefits of transport investments: some tests for stability

The case for including agglomeration benefits within transport appraisal rests on an assumed causality between access to economic mass and productivity. Such causality is justified by the theory of agglomeration, but is difficult to establish empirically because estimates may be subject to sources of bias from endogeneity and confounding. The paper shows that conventional panel methods used to address these problems are unreliable due to the highly persistent nature of accessibility measures. Adopting an alternative approach, by applying semiparametric techniques to restricted sub-samples of the data, we find considerable nonlinearity in the relationship between accessibility and productivity with no positive effect to be discerned over broad ranges of the data. A key conclusion is that we are unable to distinguish the role of accessibility from other potential explanations for productivity increases. For transport appraisal, this implies that the use of conventional point elasticity estimates could be highly misleading.