Social and Distributional Effects of Public Transport Fares and Subsidy Policies: Case of Madrid, Spain

Abstract

Despite the widespread implementation of urban transport subsidies in many cities, there are still only a limited evaluation of the equity of these policies and scarce quantitative assessment of their distributional incidence. This research contributes to filling this gap by developing a practical approach to evaluate the impact of fare subsidization on vertical equity. This paper implements a two-step methodology. First, two main indicators were developed to measure the social impact of the travel pass, a highly subsidized fare, to determine the effectiveness of the policy in reaching lower-income citizens. Second, by using the latest disaggregated data from a transportation survey, in Madrid, Spain, a multiple regression model revealed that travel pass usage (TPU) depended mainly on income level and accessibility to public transport. The results show that the accessibility level has a positive effect on the TPU indicator, whereas income level has a negative influence. Because income level is shown to play the most significant role in influencing public transport use, the subsidy policy associated with the travel pass in the city can be considered progressive, since it effectively targets economically disadvantaged groups. This fact suggests that subsidies for public transport in Madrid tend to favor vertical equity.