Traffic, Transportation, Infrastructure and Externalities : a Theoretical Framework for a CGE Analysis

Conrad, Klaus

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URN: urn:nbn:de:bsz:180-madoc-10633
Document Type: Working paper
Year of publication: 1994
The title of a journal, publication series: Discussion Papers / Institut für Volkswirtschaftslehre und Statistik
Volume: 504
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Institut für Volkswirtschaftslehre und Statistik > Discussion Papers
Subject: 330 Economics
Subject headings (SWD): General Equilibrium Environmental Model , Verkehr , Transport , Infrastruktur , Umweltverschmutzung
Abstract: In Europe traffic congestions make it impossible to estimate travel time. The increasing number of cars calls for a transportation policy towards an improved efficiency of the transportation system. However, extending road infrastructure to reduce the congestion externality implies another type of externality, air pollution. Designing a transportation policy in industrialized countries one has to consider this trade-off. Our objective is to investigate the role of transportation services and their prices within an interindustry framework. The authority wishes to minimize total cost of production with respect to the provision of infrastructure subject to an emission standard. By omitting a financial constraint to finance infrastructure we determine the size of infrastructure where no congestion occurs. The productivity effect of infrastructure and the cost savings from a dissolved congestion determine the optimal stock of infrastructure. Our congestion index is unity in that case of no financial constraint. If the extension of infrastructure has to be paid for by taxation, we obtain a lower level of infrastructure. In view of the trade-off between the benefit of a productivity gain from a dissolved congestion and the deadweight loss from taxation this lower level of infrastructure will result in an index of congestion higher than unity, implying a negative externality to the economy.
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