Modelling Transport in an Interregional General Equilibrium Model with Externalities

6. Summary

In the paper, an analysis on the impacts of changing transportation by introducing road
pricing for cars in Denmark is presented. In the analysis, the impacts from externalities have
been included, generating substantially higher gross effects of changing transport costs. In the
paper the direct effects of changing transport costs on labour market (pecuniary externalities
or labour market enlargement effects) and on productivity (urban externalities through
positive technological spill-overs) are presented. The results of an econometric study in
Denmark were presented. The derived effects was modelled with an interregional general
equilibrium for Denmark, LINE has been used.

The analysis shows that due to reduction in congestion the Greater Copenhagen area
benefit through reduction in the transport costs, whereas rural areas suffer, because of long
commuting distances. The total effects on employment is app. 8000 including the
conventional commodity price and income reducing effects from road pricing and app. 4000
higher if externality effects are included. This demonstrates that conventional analysis is
insufficient, because real impacts are underestimated. There is a need to include externality
effects in analysis of transport system changes.

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