Edited by Kakuya Matsushima and William P. Anderson
Chapter 4: Modeling transportation in general equilibrium
Departing from conventional approaches in modeling transportation, this chapter captures transportation’s direct utility and external effects, and develops general equilibrium models of transportation for aggregate economies. The basic model determines the optimal level of transport infrastructure capital and its tax-price for an economy exhibiting constant returns to scale technology. This model framework is extended to two models for economies exhibiting increasing returns to scale. While the planning equilibria are optimal in these models as in the basic model, the decentralized market equilibria are sub-optimal. Some results of the basic model framework relevant to transportation planning and policy are discussed.
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