Institutional perspectives on road pricing : essays on implementation, response, and adaptation

Abstract

Road pricing involves charging road users a fee for the external social costs of using private vehicles. These costs typically remain unaccounted for in routine road transport operations and benefit-cost analyses. They include the costs of travel delays for other road users due to congestion, the costs of air pollution and greenhouse gas emissions, and the health costs resulting from exposure to pollutants and road accidents. In spite of strong theoretical foundations dating back to the 1920s, road pricing remains politically difficult to implement for several reasons. These include concerns about equity impacts and the lack of alternatives to the use of private vehicles, lack of public acceptance for the idea of paying a charge for personal mobility, the administrative complexity of implementation, and the uncertain long term economic impacts of the policy. My dissertation focuses on the institutional challenges to implementation of road pricing that have not received adequate attention in literature, through three papers on the following topics. 1) Vehicle Restrictions in Four Latin American Cities: Is Congestion Pricing Possible? 2) Potential Impacts of Road Pricing on Businesses and Freight Transport: The Case of the Netherlands 3) Implications of the London Congestion Charge for Firms in Key Economic Sectors: Influencing Factors, Impacts, and Responses In Paper 1, I examine the problems related to adopting road pricing in cities of the developing world that are motorizing rapidly. There are very few studies of this policy in the context of the social, economic, and institutional constraints unique to urban areas in developing countries. The cases studied include four Latin American cities where the command-and-control policy of vehicle circulation bans is already in effect for over a decade, in response to environmental and transportation problems. These restrictions have not been able to prevent the growth in car ownership and traffic congestion, creating the need to consider alternative market-based approaches such as road pricing along with complementary investments in urban public transportation.

(cont.) In Paper 2, I develop a conceptual framework and propositions to examine the impacts of road pricing on businesses. Distance-based road pricing has been proposed for all roads in the Netherlands and will be applicable to all vehicles from the year 2012. I discuss different theoretical frameworks that may be applied to the subject of firm response to road pricing, focusing on the use of institutional theories such as the resource dependency theory. These theories are particularly instructive in understanding how road pricing might affect firm behavior and economic relationships. I use ideas on organizational adaptation from literature on organization theory to understand the factors affecting firm response to road pricing. In Paper 3, I adapt and apply the conceptual framework developed in Paper 2 by conducting a survey of businesses in diverse economic sectors in London. The survey instrument included questions about how businesses have altered their locations, logistics operations, policies with respect to employees, and customer-supplier relationships in response to the London congestion charging scheme. I study how these changes may have affected their performance and competitiveness. I found that firm characteristics such as sector, size, and location govern the impacts of congestion charging through institutional variables such as bargaining power within the supply chain, reliance on freight transport, and the effect of other regulations. The findings of this paper are valuable for other cities planning the implementation of road pricing. Together, papers 2 and 3 contribute to a better understanding of the impacts of road pricing on businesses and economic activity using an institutional economic approach.