Affordability and Subsidies in Public Urban Transport: What Do We Mean, What Can Be Done?

53 Pages Posted: 20 Apr 2016

See all articles by Nicolas Estupinan

Nicolas Estupinan

World Bank

Andres Gomez-Lobo

University of Chile - Department of Economics

Ramon Munoz-Raskin

World Bank

Tomas Serebrisky

Inter-American Development Bank (IDB)

Date Written: December 1, 2007

Abstract

Subsidy policies on public urban transport have been adopted ubiquitously. In both developed and developing countries, subsidies are implemented to make transport more affordable. Despite their widespread implementation, there are virtually no quantitative assessments of their distributional incidence, making it impossible to determine if these instruments are pro-poor. This paper reviews the arguments used to justify subsidy policies in public urban transport. Using different tools to quantitatively evaluate the incidence and distributive impacts of subsidy policy options, the paper analyzes the findings of a series of research papers that study urban public transport subsidy policies in developed and developing countries. The available evidence indicates that current public urban transport subsidy policies do not make the poorest better off. Supply-side subsidies are, for the most part, neutral or regressive; while demand-side subsidies perform better-although many of them do not improve income distribution. Considering that the policy objective is to improve the welfare of the poorest, it is imperative to move away from supply-side subsidies towards demand-side subsidies and to integrate transport social concerns into wider poverty alleviation efforts, which include the possibility of channeling subsidies through monetary transfer systems or through other transfer instruments (food subsidies, health services and education for the poor). The general conclusion of the paper is that more effort should be devoted to improve the targeting properties of public urban transport subsidies using means-testing procedures to ensure a more pro-poor incidence of subsidies.

Keywords: Transport Economics Policy & Planning, Transport in Urban Areas, Urban Transport, Taxation & Subsidies, Economic Theory & Research

Suggested Citation

Estupinan, Nicolas and Gomez Lobo, Andres and Munoz-Raskin, Ramon and Serebrisky, Tomas, Affordability and Subsidies in Public Urban Transport: What Do We Mean, What Can Be Done? (December 1, 2007). World Bank Policy Research Working Paper No. 4440, Available at SSRN: https://ssrn.com/abstract=1073383

Nicolas Estupinan

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Andres Gomez Lobo

University of Chile - Department of Economics ( email )

Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile

Ramon Munoz-Raskin

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Tomas Serebrisky (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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