The Regional Economics Applications Laboratory
Announces a Seminar by:

Renato Schwambach Vieira

PhD Student: Department of Agricultural and Consumer Economics

 "Efficiency and Distributional Characteristics of Transit Fare Subsidies in the City of São Paulo, Brazil"




Davenport Hall


Abstract: This study evaluates the efficiency and distributional characteristics of the transit fare subsidy in the city of São Paulo, Brazil.  The analysis integrates a discrete choice estimation of demand with an aggregated congestion model. Counterfactual values for the transit fare are simulated assuming that the budget deficit of the city government could be covered by an increasing income tax.  Results show that social welfare increases with subsidization, with an optimal transit fare of R$0.00.  The distributive analysis show that the subsidization have a progressive effect, with higher average gains to lower income individuals and an individual welfare loss bounded by the increase on income taxation.  Additionally, a cross subsidization scheme is also analyzed using a set of hypothetical values for a new fuel tax.  In this case, the analysis indicates that social welfare gains could also be achieved with similar average distributional characteristics, however, individuals who are more likely to use a private car, regardless of income, would suffer a higher welfare loss.
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