The Distributional Impacts of Transportation Policies: A Research Design for the Case of Roadway Tolls

Highway congestion in North America is widely responsible for polluting air, increasing noise, and wasting time spent in traffic, largely because drivers do not pay the full marginal cost of their own traveling decisions. Economists agree that a well-designed congestion pricing system can correct for these externalities, but there is widespread political and public resistance to such a plan, possibly due to disagreements about its potential distributional effects. This paper documents a research design for examining the distributional effects of transportation policies, using a bridge toll as a case study. The methodology employs the mode choice component of a conventional travel model, implemented as a binomial logit. To measure individual welfare, a compensating variation estimator that allows income to have an effect on choice is used, where the marginal utility of money is allowed to vary by income level; this helps avoid understating the welfare effects on low-income individuals. The estimated individual welfare distributions for all individuals can then be compared for the no-toll and with-toll scenarios using a collection of quantitative assessment tools, such as: divergence measures to distinguish any redistributive effect; relative distributions to characterize the shape of the redistributive effects and identify income ranges that are affected differently; and polarization indices to summarize whether the effect is progressive or regressive. By combining several innovative approaches that have only been used separately in the literature, the proposed approach informs the discourse on roadway pricing by examining welfare effects across the entire range a distribution, without discarding important distributional information at any stage of the analysis.