Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/125089
Authors: 
Tikoudis, Ioannis
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-085/VIII
Abstract: 
The paper presents a polycentric general equilibrium model with congestion externalities and distortionary labor taxation calibrated to fit the key empirical regularities of the regional economy and transport system of Randstad conglomeration. In line with more stylized models, marginal external cost pricing (i.e. a quasi first-best Pigouvian toll that ignores the pre-existing taxation in the labor market) is shown to generate considerable welfare losses. Surprisingly, the quasi first-best Pigouvian toll is welfare decreasing even when the road tax revenue is used to finance labor tax cuts. This is due to the large deviation of marginal external costs from the optimal toll levels, as the latter are found to be negative in many of the network links. Approximations of the key double-dividend effects show that, in those links, the tax interaction effect is strong enough to outweigh both the revenue-recycling and the Pigouvian effect.
Subjects: 
applied general equilibrium
network
road pricing
commuting
polycentricity
environmental taxation
double-dividend
JEL: 
D58
H21
H23
C63
R13
R40
Document Type: 
Working Paper

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