Tradable mobility permits in a monocentric city with pre-existing labor taxation: A general equilibrium perspective

This paper studies tradable mobility permit schemes in a monocentric city with distorting labor tax, considering spatially differentiated allocations of permits to households. Numerical results show that an allocation proportional supply reaches about 99.9% first-best welfare, clearly outperforming scheme lump-sum permits, and being more efficient than the second-best tax for levels 20% or higher. is due welfare gains incentivizing supply, which has effect similar revenue recycling conventional road pricing, can be optimized by social planner exploiting spatial differences. Other alternatives, such as distance from CBD cordon-based do not reach those high efficiency. Our provide insights into efficiency driving alternative pricing tackle present externalities, showing differentiation powerful instrument hands regulator. • We study effects general equilibrium. Schemes interact pre-existing distortions market. Spatial key determinant welfare. Allocation related most scheme. For higher taxes, other lose their potential raise