The effect of paid parking and bicycle subsidies on employees’ parking demand

Employers usually offer free parking to employees, which may lead to welfare losses. Using exogenous variation in daily peak-hour parking tariffs, monthly subscription fees and bicycle subsidies faced by hospital employees, we demonstrate that employees’ parking demand is reduced by about 5 percent for every euro per-day tariff increase, and that it is reduced by about 2 percent for every euro subscription fee increase. The introduction of higher parking prices particularly reduced demand during peak hours. We offer compelling evidence that bicycle subsidies reduce parking demand. Hospitals that offer free parking to employees, but then introduce a parking tariff equal to marginal parking costs, induce modest yearly welfare gains of € 60 per parking space, about 8 percent of parking resource costs. This is slightly less than previously found in the literature.