Subsidizing the public urban transport has been a common feature across countries and cities, both developed and developing countries have implemented subsidies resulting in a sound demand for public transport services. However, the reasons behind why cities are subsidizing public transport and the means to do it are not as common ground as the existence of the subsidies. It is possible to justify the existence of subsidies on economic efficiency arguments, since the subsidies compensate for other externalities in the system such as private transport use, pollution, congestion, and traffic incidents (Parry & Small, 2009). It might also be justified on the ground of social redistribution and inclusiveness, where the subsidy is aimed at making public transport “affordable” to poor households (Serebrisky, Gómez-Lobo, Estupiñán, & Muñoz-Raskin, 2009).
In developing countries, tight budget constraints imply a hard limit on the subsidies budget. The need for economic sustainability in these countries means cities should try to set fares for cost-recovery instead of a subsidized fare. Yet, setting fares at cost-recovery might price out of the most vulnerable parts of the demand for public urban transport. Therefore, given the limited resources and competing parts, there is a need to …show more content…
My study focuses on current users because they earn the benefits of the subsidy the fastest and thus are more likely to be immediately impacted by it. The metrics to evaluate the subsidy however are not clear since subsidies can be implemented for several different reasons. I discuss two ways in which the subsidy is improving conditions for current users. One, users are travelling more instead of spending less in their transport budget. Two, transit riders use those additional trips to travel to areas of the city with more job density than they could afford
In developing countries, tight budget constraints imply a hard limit on the subsidies budget. The need for economic sustainability in these countries means cities should try to set fares for cost-recovery instead of a subsidized fare. Yet, setting fares at cost-recovery might price out of the most vulnerable parts of the demand for public urban transport. Therefore, given the limited resources and competing parts, there is a need to …show more content…
My study focuses on current users because they earn the benefits of the subsidy the fastest and thus are more likely to be immediately impacted by it. The metrics to evaluate the subsidy however are not clear since subsidies can be implemented for several different reasons. I discuss two ways in which the subsidy is improving conditions for current users. One, users are travelling more instead of spending less in their transport budget. Two, transit riders use those additional trips to travel to areas of the city with more job density than they could afford