GG 541 November 6, 2008

Basic Demographic Trends Population growth in US twice as fast as in Europe Urbanization - about 75% and over in USA, UK, Canada, Netherlands, Germany & France Variable elsewhere

Price of car ownership and use higher in Europe as compared with USA. Explains lower levels per capita of car ownership & use.

Car ownership and use grew from 1970 to 1992 in US and Europe, but at considerably different rates - faster growth from lower ownership base - gap narrowing between countries

Model Split Auto share of total motorized trips: over 95% in US % in Western Europe cities % in Eastern European cities Bicycling & Walking: % in European cities (average 30%) 5% in US

Differences between European & US Policies Europe In Europe, here was expansion of public transport services, lower public transport fares, traffic priority to public transport. Big enhancement of facilities for pedestrians and cyclists (car-free zones, bikeways).

Within Europe differences between UK and continental countries (France, Netherlands, & Germany) UK reduced subsidies, while the continental countries increased them [between , public transport use increased by 58% in France and declined by 26% in the UK]

Trends in Urban Land Use Patterns Extreme decentralization of population and economic activity in N-S SMSAs. European metro areas are also decentralizing but not to the same extent. 42% of that European largest metropolitan areas live in the central city. The corresponding figure for 10 largest US SMSAs is only 26%.

Similar differences between US and Europe in the spatial distribution of economic activities in SMSAs

Financing of Urban Public Transport Public transport revenues covers only a portion of operating expenses About 1/3 in Italy & Netherlands 40% in US & Sweden 50% in Canada & France 60% in Germany

Fare Recovery Ratio in Urban Public Transport in Selected Countries (1992 or latest available year)

The Pros & Cons of Subsidizing Three Pro Subsidy Arguments Argument 1. Motorists do not pay full marginal social costs of auto use, so transit subsidies are necessary to insure that travel choices between private & public mode are not distorted. Subsidy second best, if auto use cannot be properly priced.

Pro Argument 2. Public transport is characterized by economics of scale, so that fares set at marginal costs will be insufficient to cover total costs. Economies of scale more likely in rail than in bus.

Pro Argument 3. Poor & disadvantaged persons more dependant on public transit. Transit important to assure that such persons participate in society.

Con Arguments for Subsidy Con Argument 1. Direct price elasticity of demand for transit -0.1 to -0.5 (typically -0.3). Cross elasticity of demand for auto trips with respect to public transport very small - transit subsidies a costly way to correct for mispricing of auto use.

Con Argument 2. Increasingly transit users are affluent individuals commuting from the suburbs to the central city.

Con Argument 3. Most of the subsidies captured by higher wages or reduced productivity.

Since 1964, federal grants are available in US for capital improvements (up to 80% now). Operating grants (much less generous) available since 1974 and distributed to cities on the basis of a formula rather than for specific projects.

Preference for rail over other projects