Abstract:
One of the unanswered questions in the field of urban economics is to which extent subsidies to public transit are justified. We examine one of the main benefits of public transit, a reduction in car congestion externalities, the so-called congestion relief benefit, using quasi-natural experimental data on citywide public transit strikes for Rotterdam, a city with mild congestion levels. On weekdays, a strike induces travel times to increase only marginally on the highway ring road (0.017 min/km) but substantially on inner city roads (0.224 min/km). During rush hour, the strike effect is much more pronounced. The congestion relief benefit of public transit is substantial, equivalent to about 80% of the public transit subsidy. We demonstrate that during weekends, travel time does not change noticeably due to strikes. Furthermore, we show that public transit strikes induce similar increases in number of cyclists as number of car travelers suggesting that bicycling-promoting policies to reduce car congestion externalities might be attractive in combination with first-best congestion pricing.
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In Table 9, column 1, we provide the assumptions which allow us to calculate the external cost of congestion during strikes. In Rotterdam, cars trips have an average length of 15 km of which 62% are driven on inner city roads and the remaining 38% on highways. Given the estimated travel time increase of 0.224 min/km on inner city roads (the weighted-average effect) and 0.017 min/km on highways, a strike induces an additional external cost of congestion of €607,052. The majority of this cost, €580,071 is on inner city roads, and an additional €26,981 on highways....
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Based
on the external costs of strikes, we aim to calculate the (long-term)
congestion relief benefit of public transit. We will start from the idea
that the beneficial effect of public transit provision is likely larger
in the long-run than in those estimated using the short-run strike
data. Hence, by equating the congestion benefit to the external
congestion losses of strikes, and annualizing the congestion benefit
(assuming 252 working days), we will provide underestimates of the
long-run congestion relief benefit. Based on this calculation, the
annual benefit is €153 million (see Table 9),
about €128 per inhabitant. This excludes any benefits of public transit
provision on weekends that we assume to be negligible. Given 721
million public transit passenger kilometers (OVPRO, 2014),
the congestion reduction benefit per public transit kilometer is €0.21.
This benefit is substantial given that the cost per public transit
kilometer is €0.46.
The costs of providing public transit in Rotterdam are partially covered by subsidies, about €200 million per year, i.e. €0.28 per public transit kilometer.46 The congestion relief benefit is then about 77% of subsidies.47 It is useful to examine this result under different assumptions. For example, if we assume that the specification of complete strikes (reported in Table 5, column 4) is more indicative of the congestion relief benefit, then the benefit even is almost identical with current subsidies (see column 3). In contrast, if we make very conservative assumptions by assuming a trip length of 10 km, an equal split in distance traveled on highway and inner city roads, and that only inhabitants in the city of Rotterdam (and not the whole metropolitan area) are affected by the strike, then the congestion relief benefit is still 21% of the subsidy (column 2).48 These estimates indicate that the congestion relief benefit alone is substantial but possibly insufficient to justify the current supply of public transit in Rotterdam. Additional gains of public transit provision, such as economies of scale in public transit provision and productivity increases due to decreased car congestion might support current levels of subsidies (Graham, 2007). To do an overall welfare analysis of public transit provision is however beyond the scope of this paper.49
