Evaluating Transit Subsidies in Chicago

Abstract

This paper presents a model that calculates the social welfare benefits of using additional subsidy to reduce fare levels or improve service levels of public transit in Chicago. The model differentiates between the effects in peak and off-peak periods for both bus and rapid rail service. Results of the analysis are that bus fares should be reduced during the off-peak; rail fares are broadly acceptable; bus service levels are broadly acceptable, except for the peak period where they are too high; and rail service levels are too high at all times of the week, but especially in the peaks and on Sundays. In general, it is more advantageous to use subsidy monies to reduce fares than improve service levels. Even if overall subsidy levels were not increased, society would be better off if service levels were reduced, and the money saved channeled into reductions in fares.