The efficiency effects of transport policies in the presence of externalities and distortionary taxes

This paper uses an applied general equilibrium model for Belgium to study t he marginal efficiency effects of the revenue-neutral introduction of three transport instruments, when the government is using distortionary taxes fo r revenue-raising purposes. The three transport instruments are: peak road pricing; higher fuel taxes; and higher subsidies to public transport. The r evenue-preserving instruments include lump sum transfers, a tax on labour i ncome, and other transport instruments. The evaluation takes into account t he impact of the policy reforms on three transport externalities: congestio n; air pollution; and accidents. The feedback effect of congestion on the b ehaviour of economic agents is modelled explicitly.