Road pricing and agglomeration economies: a new methodology to estimate indirect effects applied to the Netherlands

Agglomeration effects of congestion charging are, however, difficult to assess using this approach because the government revenue from the congestion charge should be redistributed to the population. This redistribution of government revenue may be either agglomeration- or dispersion-augmenting and thereby change the agglomeration effects significantly. In this paper, a methodology is proposed based on a spatial computable general equilibrium model to estimate the agglomeration effects of congestion charging with an agglomeration-neutral redistribution effect. In this manner, the redistribution effect will be taken into account without letting it interfere with the effect of the congestion charge. This is important to evaluate the congestion charge, independent of the chosen redistribution scheme. In the application of the proposed methodology for the Netherlands, agglomeration benefits are found to be substantial and have, in general, the opposite sign as the relative cost change.