Toll competition in General Equilibrium Land Use and Transport models: explorations with a North-South setting for Randstad

So far we have assumed the existence of a (federal) government capable of imposing a different level of a road tax on each part of the network and returning the revenue either lump-sum or in the form of a labor tax cut. Although the above setting can potentially lead to an (economically) efficient allocation (i.e. when the correct level of a tax is combined with the correct revenue-recycling program), the implementation of tax reforms introducing urban road charges has met strong resistance. One of the drivers behind the low acceptability may be the spatial profile of such reforms: decisions over the details of the pricing scheme (type, charges) and the use of the generated revenue are usually centralized, leaving the impression that local welfare is decreased after the introduction of these policies. There are at least two reasons why a centralized reform may give rise to substantial local discomfort. The first is that the pricing scheme may create, or intensify spatial inequality, despite being (on average) welfare improving. For instance, a cordon toll favors certain population groups in a monocentric setting, such as those that own land inside the cordon area (see Verhoef, 2005). The hypothesis that road pricing may induce local discomfort is matched by the results of the referendum succeeding the Stockholm congestion charge trial period, During this period, authorities charged a road fee to the users of a set of links which, together, form a virtual cordon encircling a large part, but not the entire area, of Stockholm municipality. As the middle and right panel of Figure 6.1 suggest, the cordon excludes part of Stockholm municipality and the spatial dominion of all the other municipalities in Stockholm county. In the referendum that succeeded the trial period, all fourteen municipalities surrounding the municipality of Stockholm voted against the permanency of the measure, with negative rates ranging from 54.1% to 70.4% (while inside the cordon a majority of 53% voted yes). The second driver behind the low acceptability of urban tolls is likely to be the use of collected revenue. Local discomfort may be fueled by a revenue recycling scheme that is perceived to be unfair, or (even worse) that is not known to the public. Here, the argument is that the tax lacks, at least locally, the element of reciprocity. For instance, while the citizens of a certain geographic area may contribute a large portion of the collected …