Abstract
This paper investigates second-best congestion pricing in a monocentric city characterized by distortionary regulations in the housing market (building height restrictions, no-development areas and property taxation). We demonstrate that the welfare gain of a Pigouvian tax may first fall and then increase as building height restrictions become more stringent. For example, a Pigouvian toll imposed in a city without restrictions may produce up to 40% larger welfare gains than Pigouvian tolling in a city with a mild, uniform in space, floor-to-area ratio restriction. In the presence of a tax-induced distortion, deviations of the Pigouvian toll can lead to non-negligible welfare gains. We discuss the important policy implications of the above findings.
| Original language | English |
|---|---|
| Pages (from-to) | 342-359 |
| Number of pages | 18 |
| Journal | Transportation Research Part B: Methodological |
| Volume | 117 |
| Issue number | Part A |
| DOIs | |
| Publication status | Published - 2018 |
Funding
We would like to thank the editor, Robin Lindsey, as well as three anonymous referees, the participants in the 8th Kuhmo-Nectar conference (Toulouse, June 2014), in the Urban Economics session of NARSC conference (Atlanta, November 2013), the attendants of the seminar in Tinbergen Institute and the participants in the meetings of i-PriSM project for useful comments and feedback. We are indebted to the Netherlands Organization for Scientific Research ( NWO grant 434-09-021 ) and to the European Research Council (AdG grant # 246969 OPTION) for financial support. Appendix A
| Funders | Funder number |
|---|---|
| Netherlands Organization for Scientific Research | |
| Seventh Framework Programme | 246969 |
| European Research Council | |
| Nederlandse Organisatie voor Wetenschappelijk Onderzoek | 434-09-021 |
Keywords
- Building height restrictions
- Cost-benefit analysis
- Floor-to-area ratio regulations
- Monocentric city
- No-development areas
- Property tax
- Road pricing
