Abstract
Subsidy policies on public urban transport have been adopted ubiquitously. Both in developed and developing countries, subsidies are implemented under two major premises: (1) to increase public transport use and to reduce externalities, such as greenhouse gas emissions and congestion, and (2) to make transport more affordable, particularly for the poorest. This paper focuses on the latter. Despite the widespread implementation of subsidies, there are virtually no quantitative assessments of their distributional incidence, making it impossible to determine if these policy instruments are pro‐poor. Using different tools to quantitatively evaluate the incidence and distributive impacts of subsidy policy options, this paper analyses the findings of a series of research papers that have studied urban public transport subsidy policies in developed and developing countries. Available evidence indicates that current public urban transport subsidy policies do not make the poorest better off. Supply side subsidies—provided to the operator—are, for the most part, neutral or regressive; while demand side subsidies—provided to the user—perform better, although many of them do not improve income distribution. Considering that the vast majority of developing countries justify public urban transport subsidies on social grounds, as a means to improve the mobility, and thus welfare, of the poorest, it is imperative to move away from supply side subsidies towards demand side subsidies and integrate transport social concerns into wider poverty alleviation efforts, which include the possibility of channelling subsidies through monetary transfer systems or through other welfare instruments (food subsidies, health services and education for the poor).
Highlights
The attention devoted to the relationship between poverty and transport is increasing considerably
Air quality and safety are among the most important objectives being pursued by developing countries that have recently embarked in urban transport reforms
In this paper we review the case for subsidies in the urban transport sector, discuss the available policies and the trade-offs involved in choosing optimal policies, and develop a methodology to quantitatively evaluate different policy options
Summary
The attention devoted to the relationship between poverty and transport is increasing considerably. Unlike the efficiency argument for subsidies, this paper emphasizes the social and distributive dimension of public transport subsidies In this sense, it follows papers such as Frankena (1973), Pucher (1981), Guria and Gollin (1986) and Asensio, Matas and Reymond (2003) rather than the plethora of papers dealing with the externalities and efficiency aspect of the problem. The main message that comes out of this paper is that it is not clear that transport subsidies that operate in isolation from more general welfare programs have been effective in alleviating the problems faced by the poor Whether they can be made more effective is an open question, but current policies are not achieving this goal. This is an area that requires greater collaboration between transport specialists, economists and social welfare experts
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