Abstract:

General justification for public transport subsidies is the promotion of transfer from relatively inefficient means of transportation to more efficient means, thereby reducing congestion and air pollution externalities. More efficient means of transport are the modes that can move more people with lesser costs and externalities. Public transport modes are considered more efficient than private counterparts. In Europe most of the public transport modes are government- subsidized, hence demand elasticities for this modes are quite low. In developing countries, such as the Philippines, public transport includes a wider variety of modes operated by private entities. Hence, demand elasticies for public transportation are higher, transfer from the road to rail transport is stickier, and subsidies for modes like the MRT 3 are harder to justify. As a consequence, MRT 3 ridership becomes very low to a point that it may fail to lessen congestion and pollution externalities.

This paper provides quantitative rationale for the subsidies provided to MRT 3. Marginal social cost of road transportation (MSC), inclusive of the estimated congestion costs and air pollution costs associated with congestion, is estimated. A demand function is then juxtaposed over the MSC. The difference between the MSC and demand in areas beyond the equilibrium point is considered as congestion and air pollution externalities. The amount of externalities alleviated by MRT 3 due to ridership transfer is then estimated. Simulations on various demand elasticities were conducted to observe how rail tariff policies should move in accordance to demand elasticities. This paper should provide policy makers bases for providing subsidies for mass rail transits.

Presentation: http://www.cleanairnet.org/baq2006/1757/docs/SW7_2.ppt