Wednesday, March 9, 2016

Urban Economics: Transportation, Transit and Externalities

After the establishment of the interstate system in the US, individuals have become more inclined to live in the suburbs, and drive to work everyday. While a number of people carpool or use some kind of public transport, most people prefer to drive alone. There has been a rise of extreme commuting - which is defined as spending 90 minutes or more one way to reach one's work. According to this paper, an extreme commuter is a person likely to be married, older males who earn a higher salary. There are also some cases of super extreme commuting too.

There are many reasons why a person would like to live in the suburbs but work in the urban core. Suburbs provide some desirable amenities, and as more people prefer the suburbs, it creates more congestion in the urban core during specific times of the day. When a person drives alone to work, they are only considering a the private cost, and do not look into the social cost, or externality of their behavior. More cars lead to more congestion, pollution, accidents and wasted time.

Arthur Pigou said that in the presence of an externality, a tax or subsidy can be imposed to correct it. In the case of congestion, cities have been thinking about placing tolls on cars who enter downtown. Economists have been advocating for congestion tax to reduce congestion and improve the environment. For example, London tried it, but there hasn't been any improvements in congestion. Money collected from such tax can be used to improve public transportation system so that more individuals are encouraged to use it.

How can such a tax work? One flat fee for the whole day may not be efficient. A city could raise taxes in peak hours and reduce the taxes in off-peak hours. This can help to even out traffic throughout the day. This has been shown by a study done for the Government of Seattle.

Whenever there is traffic congestion, the two big questions that arise are: (1) should we build more roads? or (2) should we improve the public transport system? A big factor that influences these decisions is whether people will actually use public transportation if built. Wealthier cities may not want public transportation system. So, if a public transportation system is built and few people use it, then it will be a waste of resources and may run into losses every year. Although most public transportation system earns losses per trip, it is a good idea to subsidize them and keep them running because they help to mitigate the traffic and environmental degradation of a city.

The more car-centric a city is, the more concentrated poverty can become. Usually, places with high poverty rates are not the places where job opportunities are high. Without a good network of public transportation, the poor cannot afford to travel to work. They may not be able to live close to work because of higher cost of living in those areas. Improving public transportation system can make it easier for the poor to find work. On top of that, a person with an arrest record may not obtain a drivers licence, and this can hamper their ability to work.


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