|Authors:||Lasse Fridstrøm, Harald Minken, Arild Vold|
First and second best marginal cost road pricing is studied by means of the RETRO model for the greater Oslo area. Special emphasis is put on equity effects, as described by changes in the Lorenz curve or in the Gini coefficient, both of which are defined in terms of household income per consumption unit. The economic efficiency of marginal cost pricing appears quite sensitive to assumptions regarding the shadow value of public funds, much larger gains being calculated under a 0.25 value of the shadow price than when the shadow price is zero. The income distribution impact of marginal cost road pricing is generally unfavourable, not so much because lower income groups have their accessibility reduced, but because they end up paying a larger share of their income in road charges than do families in the upper income brackets. This unfavourable income distribution effect may, in prinicple, be neutralised if the revenue is redistributed to the consumers in the form of a poll transfer. But in this case a major part of the economic benefit, due to the provision of additional public funds, will most probably be wasted.