This paper presents a model that calculates the social
welfare benefits of using additional subsidy to reduce fare levels
or improve service levels of public transit in Chicago. The model
differentiates between the effects in peak and off-peak periods
for both bus and rapid rail service.
The potential welfare benefits of transit improvements accrue
to several different groups of people: (1) existing transit
riders; (2) automobile users who decide to switch to public
transit; (3) road users who benefit from reduced road congestion;
and (4) people who undertake new trips. These benefits are
compared with the welfare cost of the additional sales taxes that
are used to fund transit subsidies in Chicago. Results of the
analysis are that:
- Bus fares should be reduced, especially during off-peak and
weekend periods;
- Rail fares are "acceptable" in that the marginal benefit of
using subsidy to reduce fares is close to the excess burden of
raising the subsidy;
- Bus service levels are broadly acceptable, except for the peak
period where they are too high; and
- Rail service levels are too high at all times of the week, but
especially in the peaks and on Sundays.
In general, it is more advantageous to use subsidy monies to
reduce fares than improve service levels. Even if overall subsidy
levels were not increased, society would be better off if service
levels were reduced, and the money saved channeled into
reductions in fares.
"Evaluating Transit Subsidies in Chicago" by Ian Savage and August Schupp
was published in the Journal of Public Transportation, Volume 1:2 (Winter 1997) pages 93-117. View the earlier manuscript version of this paper [19 pages, 100 kb PDF].
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