External transport pricing and modal choice: evidence from a Paris case study

Abstract

Many European studies have shown that prices paid by transport users do not cover the real cost of moving. Costs related to pollution, congestion, noise and accidents are only partially covered. External costs caused by travel using public transport are lower than using cars. This deduction has pushed many authorities to encourage the transfer of passenger traffic from private car to public transport. The purpose of this study is to estimate the impact of some external costs pricing on the commuters’ modal split between car and public transport. This paper will use two pricing schemes: exogenous toll and marginal social cost pricing. To put it into practice, the paper estimate Multinomial Logit (ML). On the other hand, ML has a critical assumption related to the Independence from Irrelevant Alternatives. In order to relax this property the paper will recast the model as a nested structure. Price scenarios through a Nested logit model are simulated. Therefore by estimating the choice probabilities, the paper will calculate the welfare gains. The aim results of this paper indicate that prices paid by transport users must reflect marginal external costs (mec). For the exogenous toll, the welfare gains are relatively small. This finding is not surprising because taxes are below the mec. For the marginal social cost pricing, all taxes are corrected so as to equal the mec; the welfare gain is estimated at 0.61%. It is also evident that a part of the reduction in car use is due to its substitution for public transport.