Congestion charges and labour market imperfections

Abstract

Standard cost-benefit analyses of transport policy measures will not capture all benefits and

losses if there are labour market imperfections. In the case of congestion charges, theoretical

analyses have raised concerns that these effects may constitute considerable losses, possibly

to the extent to that aggregate welfare is reduced, contrary to conventional wisdom. We

investigate this by estimating the effects on labour income of the Stockholm congestion

charges, using an estimated relationship between accessibility and income. Results show that

effects on labour income are in fact positive. It turns out to be crucial that the model accounts

for value-of-time heterogeneity.

Date of manuscript: 24 march 2015