Abstract
In this paper, we build a simple model to investigate the impacts of using aviation tax to subsidize high-speed rail (HSR). We find that when the HSR subsidy is not directly linked to the aviation tax, introducing this subsidy will decrease the air traffic and increase the rail traffic on the route where air transport and HSR compete. However, if part of the aviation tax revenue is earmarked for the HSR subsidy (i.e., the integrated tax-subsidy policy), the traffic implications of the HSR subsidy will be the opposite. To extend the analysis to a transportation network, when the integrated tax-subsidy policy only involves aviation tax revenue from routes with HSR presence, it will decrease air traffic on routes without HSR. When the integrated tax-subsidy scheme involves tax revenue from the whole network, the traffic implications depend on the comparison between aviation tax rate on routes with and without HSR.
Published Version
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