Evaluation of the Effects of Transit Subsidy Policy on Households' Travel Behaviors: Computable General Equilibrium Approach

Abstract

The urban form and transportation cycle are common yet crucial factors for urban managers and transportation planners to devise effective transportation management strategies. This paper considers the effects of transit subsidy policy on households’ travel behaviors in a computable general equilibrium model of a monocentric city with two income classes. The proposed model explicitly formulates the interrelationship among three parts of agents, namely the government, the agencies providing transportation services, and the households of different income levels. The government is intended by the transit subsidy policy to encourage households to travel by bus and maximize social welfare. Meanwhile, the households choose their residential locations and travel mode to maximize the household’s utility under a limited budget. Furthermore, the agencies providing transportation services, as part of the urban transport system, will endeavor to maximize their criteria (utility or profit) since they are determined by the economic conditions. Besides, the model demonstrates that government subsidies for bus travel affect not only the residence location and travel mode of households but also the supply agencies that provide transportation service. The effects are manufactured by applying a numerical general equilibrium approach calibrated revealing a significant relationship between the degree of exposure to the transit subsidy policy and the economic identity of the agencies. The transit subsidy policy is not necessarily beneficial to low-income households. Therefore, it also indicates that the proposed model responds to the impact of transit subsidy policy on household travel behavior, particularly in terms of revealing the relationship between households and internal other agencies.