Voting on Road Congestion Policy

Abstract

This paper studies the political economy of urban traffic policy. First, it examines how the institutional setup affects the policy adopted by local governments. A city council and a regional government (representing city and suburbs), elected by majority voting, decide respectively on parking fees and road toll. Both are below the optimum when median voters in city and suburbs prefer cars to public transport sufficiently more than the average. Moreover, even if the city government would have set an optimal road toll, the regional government blocks it when the median suburban voter prefers cars strongly enough. Letting the city control both parking and road pricing may therefore increase chances of adoption for the latter. However, this is not necessarily optimal: when local voters choose lower-than-optimal car charges, imperfect governmental coordination may reduce the inefficiency, producing higher charges than if one government controlled them both. Finally, we examine how the use of revenues affects acceptability of road pricing. Earmarking for public transport is welfare enhancing, compared to lump-sum redistribution, only if the city government is granted additional funds by the national government.