TAILIEUCHUNG - A Companion to Urban Economics - Arnott and McMillen - Chapter 15

C H A P T E R F I F T E E N Urban Transport Economic Theory INTRODUCTION Although the transportation sector constitutes a small share of total production (about 3 percent of GDP in the United States), transportation costs play a critical role in the formation and workings of cities. | A Companion to Urban Economics Edited by Richard J. Arnott Daniel P. McMillen Copyright 2006 by Blackwell Publishing Ltd I CHAPTER FIFTEEN Urban Transport Economic Theory Yoshitsugu Kanemoto Introduction Although the transportation sector constitutes a small share of total production about 3 percent of GDP in the United States transportation costs play a critical role in the formation and workings of cities. For example the introduction of urban transit such as trolley lines and subways in the nineteenth century was the key to the emergence of giant cities such as New York Mills Hamilton 1989 . In the twentieth century the internal combustion engine caused another revolution in urban structure leading to more decentralized metropolitan areas. The striking difference in urban form between Tokyo and Los Angeles is clear evidence of the importance of transportation. Tokyo is a mass-transit-based city and the population density of the metropolitan area is about 3 424 per km2. Los Angeles an automobile-based city has a much lower density the population density of Los Angeles - Riverside - Orange County CMSA is 188 per km2 and even for the core area Los Angeles - Long Beach PMSA the density is 916 per km2. Urban transportation is associated with a variety of externalities and for technological and political reasons it is difficult to price them properly. Most important among them quantitatively is traffic congestion. Traffic jams during morning and evening rush hours are common in most cities in the world. The magnitude of congestion externalities varies enormously depending on location and time. The Federal Highway Administration in the USA estimates the average congestion cost for passenger cars to be cents per mile for urban interstate highways compared with cents for their rural counterparts Federal Highway Administration 2000 . According to Newbery 1990 Urban central areas at the peak have an average congestion cost of 10 times the average over all .

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