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Reforming Transport Pricing in the European Union

A Modelling Approach

Edited by Bruno De Borger and Stef Proost

This timely book deals with the problem of pricing passenger and freight transportation within Europe. The contributors argue that current legislation affecting pricing and regulation is increasingly less successful in dealing with market failures and externalities such as congestion, air pollution, noise and accidents. Technological progress and greater European co-operation has brought increased scope for the reform of transport policies.
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Chapter 5: Methodology and structure of the interregional model

Bruno De Borger


Bruno De Borger 5.1 INTRODUCTION The purpose of the interregional version of the model is to analyse optimal pricing and regulatory policies for interregional transport. Although the overall structure of the model is quite similar to that of the urban version described in Chapter 4, there are a number of important differences. Some are induced by the specific characteristics of interurban transport (for example, the more detailed treatment of freight transport in an interurban environment, taking account of the effects of freight transport prices on production costs and consumer prices, the relatively minor role of parking costs, and so on), others are related to the specific complications that arise because of the incorporation of international traffic flows. This seems desirable when modelling (freight) transport flows in small open economies characterised by very intense trade flows with other countries. Indeed, the international component of transport flows creates a number of complications that were captured in the design of the interregional model. For example, since in some countries a non-negligible share of all (especially freight) flows consists of international transport and pure transit, a substantial fraction of external congestion, accident and pollution costs in such countries is generated by foreign transport firms. Moreover, it is well known that some transport externalities generate international spillovers; emissions of particular pollutants spill over to other regions (acid rain, global warming, and so on) and therefore generate external costs abroad. In addition, the prevalence of international transport flows and pure transit...

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