Distributional Effects of Public Transport Subsidi

Journal of Transport Geography 84 (2020) 102674
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Journal of Transport Geography

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Distributional effects of public transport subsidies T

a,⁎ b c
Maria Börjesson , Jonas Eliasson , Isak Rubensson
a
VTI Swedish National Road and Transport Research Institute, Sweden and KTH Royal Institute of Technology, Sweden
b
Linköping University, Sweden
c
Stockholm Public Transport Administration and KTH Royal Institute of Technology, Sweden
ARTICLE INFO ABSTRACT
Keywords: We analyze the distribution of transit subsidies across population groups in Stockholm. We develop a novel
Public transport methodology that takes into account that the subsidy per passenger varies across transit links, since production
Subsidies costs and load factors vary. With this, we calculate the subsidy per trip in the transit network and analyze the
Equity distribution of subsidies across population groups. The average subsidy rate in Stockholm is 44%, but the var-
Progressive
iation across trips turns out to be large: while 34% of the trips are not subsidized at all but generates a profit,
Distribution effect
Concentration index
16% of the trips have a subsidy rate higher than 2/3. We calculate the concentration index to explore the
distribution of subsidies across income groups. The average subsidy per person is similar for all income groups,
except for the top income quintile. This holds not only for the current flat-fare system, but also for distance-based
fares and fares with a constant subsidy rate. Transit subsidies is hence not effective as a redistribution policy in
Stockholm. The largest systematic variation we find is across residential areas: the average subsidy per person is
five times higher in the peripheral areas of the region compared to the regional core, and the subsidy per trip is
ten times higher.
1. Introduction terms of consumer surplus. They find that low-income groups gain from
optimal transport subsidies compared to the baseline. Mayeres and
Governments spend vast sums on transit subsidies. There are several Proost (2001) analyze distributional effects of transit subsidies using
arguments for subsidizing transit for reasons of economic efficiency, inequality aversion factors. Since low income groups consume more
such as scale economies and second-best pricing of road traffic ex- transit (number of trips) on average, they find that transit subsidies
ternalities. In addition to such arguments, transit subsidies are often benefit low income groups proportionally more. Gómez-Lobo (2009)
motivated using equity arguments. It is often argued in the policy de- analyze the distribution of benefits from transit use and paid fares. They
bate that since transit is used more by low income groups, transit find that the welfare system is a more efficient way of supporting low
subsidies have a progressive distributional profile. Still, there is little income groups. Serebrisky et al. (2009) analyze how benefits and costs
research on the incidence of transit subsidies in real-world transit sys- of transit use are distributed across income groups in Santiago, finding
tems underpinning this conclusion. In this study, we develop and apply that subsidies provided to users are more progressive than subsidies to
a method for empirical analysis of the distribution of transit subsidies. operators. Börjesson et al. (2019) find that optimal transit supply
To do this, we calculate the real subsidy of each individual service by benefit low income groups proportionally more in a small city than in a
subtracting paid fares from the production cost for each service, and large.
then calculate how these service-level subsidies accrue to different so- The perspective of the present paper differs from the ones above in
cioeconomic groups by taking into account how different groups use the that our starting point is the subsidy to each individual service. Services
different services in the transit system. We also compare results for with high occupancy levels need lower subsidies (or even generate
several alternative fare schemes. profits), while services with low occupancy need higher subsidies. This
Most previous studies of equity effects of public transit have either might well mean that high-income people residing in single-family
explored the distributional profile of paid fares, or of the benefits houses with lower densities receive higher subsidies than average.
generated by transit services, rather than the incidence of the actual Hence, merely noting that low-income groups make more transit trips
service-level subsidies. Basso and Silva (2014) explore the distribu- per person does not necessarily imply that more actual subsidies accrue
tional impacts of optimal transit subsidies compared to the baseline, in more to them; they may well to a larger extent use services which do
⁎
Corresponding author.
E-mail address: maria.borjesson@vti.se (M. Börjesson).
https://doi.org/10.1016/j.jtrangeo.2020.102674
Received 11 May 2019; Received in revised form 18 February 2020; Accepted 18 February 2020
0966-6923/ © 2020 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/BY-NC-ND/4.0/).
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674
not need so much subsidies. modes, all increasing operation costs. However, the results would pre-
The lack of previous analyses of the incidence of the transit sub- sumably have been reversed had more low-income peopled resided
sidies can be contrasted with a vast literature on distributional effects of further away from the centre.
congestion pricing systems for which the redistribution of resources is There is an extensive literature on socially optimal pricing and
the main focus (e.g. Eliasson and Mattsson, 2006; Kristoffersson et al., supply of transit services. This literature considers factors such as
2017; Maruyama and Sumalee, 2007; Ramjerdi, 2006; Safirova et al., economies of scale and density, crowding and second-best pricing of
2004; Santos and Rojey, 2004; West and Börjesson, 2020). The same road traffic externalities (Basso and Silva, 2014; Fielbaum et al., 2016;
holds for distributional effects of fuel taxes (Bento et al., 2009; Bureau, Gschwender et al., 2016; Jansson, 1980; Jansson et al., 2015; Jara-Díaz
2011; Eliasson et al., 2018; Santos and Catchesides, 2005; Sterner, et al., 2016, 2017b, 2017a; Mohring, 1972; Parry and Small, 2009). A
2012a, 2012b). One reason for this is probably that it is more difficult general conclusion from this literature is that fares should be differ-
to objectively calculate the subsidy per transit trip than the tax/charge entiated in space and time to take variation in positive and negative
per trip, as will be discussed in Chapter 2. externalities into account. Still, there are, as noted, few studies ex-
The production cost per passenger will vary among income groups ploring how the fare structure design impacts the distribution of the
depending on the spatial and temporal distribution of trips by different subsides across groups, which is a second purpose of this study.
income groups (which depend on where high- and low-income groups In order to compare subsidies and fare structures, we need a mea-
live) and their trip frequencies (determining occupancy levels). It will sure of their distributional profile across income groups. We will use the
also depend on the spatial and temporal distribution of the transit concentration index (Kakwani, 1977) to measure how public spending
supply. Therefore, the distribution of transit subsidies will be the result on subsidies is distributed across income groups. The index is bounded
of different conflicting forces so that only a numerical exercise of a real between −1 and 1. If all citizens receive the same amount, the index
case study can show the distribution of subsidies. A main contribution will be zero. A progressive spending profile (more is spent on low in-
of this paper is to develop a methodology for empirically computing the come groups) yields a negative concentration index, and vice versa. The
actual distribution of subsidies across different groups and individuals, index can be compared across time and countries. It has previously
which is different from the distribution of transit supply, fare structure been used to measure for instance to what extent subsidies and public
or trip frequencies. We will also show how different fare structures spending in the health sector are distributed across income groups (van
affect this distribution. Doorslaer et al., 2006; O'Donnell et al., 2007). To our knowledge, this is
Also, the studies analysing distributional profiles of fare structures the first application of it in the transport economics literature.
typically neglect production costs per trip. Some of these studies have
found that distance-based transit fares would hurt low-income groups 2. Methodology
more than high-income groups because the former are located in re-
mote areas (Sanchez and Brenman, 2007). Other studies have found the 2.1. Calculating the subsidy per trip
opposite (Bandegani and Akbarzadeh, 2016; Farber et al., 2014).
Cervero (1981a, 1981b) and Bates and Anderson (1982) find that flat The subsidy of a transit trip is the difference between its production
fares imply a moderately regressive system because short and off-peak cost and its fare. The production cost of a transit trip can be defined in
trips (relatively more frequent among low-income travellers) are cross- several different ways. In short, we define the production cost of a trip
subsidizing long trips and peak trips (relatively more frequent among with a certain transit service by dividing the total production cost of the
high-income travellers). The conflicting outcomes of these analyses service with the total number of passenger kilometres with the service,
depend to a large extent on where high- and low-income groups live, in and then multiplying the thus obtained cost per passenger kilometre
the city center or in the suburbs, and this differs among cities. with the length of the trip. A door-to-door transit trip may consist of
Another branch of the literature focuses solely on the distribution of several parts with different services.
the transit supply, measured by indicators such as the number or fre- Note that it is crucial to take into account the occupancy rates of
quency of lines or bus/train stops within walking distance, among different services when calculating the subsidy per trip, and that this
different groups (Cao et al., 2018; Delbosc and Currie, 2011; Kramer may lead to unexpected results. Imagine two residential areas served by
and Goldstein, 2015; Lubitow et al., 2017; Ruiz et al., 2017). El-Geneidy identical transit services with the same fare. One area is occupied by
et al. (2016) also take fares into account in the measure of transit ac- low-income residents, and the other by high-income residents. If the
cessibility. There are also studies focusing specifically on transit ac- low-income residents make more transit trips per person, the load factor
cessibility of low-income or otherwise socially disadvantaged groups on their transit service will be higher, and hence require less subsidies
(Adorno et al., 2018; Deakin, 2007; El-Geneidy et al., 2016; Garrett and (if any). In this example, the rich group will effectively receive more
Taylor, 1999; Lubitow et al., 2017; Murray and Davis, 2001). Some transit subsidies per person, and transit subsidies will hence have a
even consider transit access as a right (Hamburg et al., 1995; Roy and regressive distributional profile – even though the poor make more
Caywood, 2018). transit trips per person!
Hence, what the previous equity literature has not accounted for, Note also that we are not trying to calculate welfare-optimal sub-
which is a key contribution of the present paper, is that the cost of a sidies, but merely calculate how actual subsidies accrue to different
providing a given level of transit access requires different amounts of groups. In the example above, it would be welfare-improving to spend a
resources. Iseki (2016) is an exception, taking into account the dis- higher subsidy on the bus with lower occupancy (reflecting low mar-
tribution of funding via a land tax when calculating the distribution of ginal cost), even if the average subsidy per passenger is already high.
costs and benefits among 9 townships in Ohio. However, this analysis But even if the marginal production cost of the trip on the bus with low
does not take fares into account and is on an aggregate townships level, occupancy rate is low, the bus still requires a subsidy that must be paid
which precludes an analysis of the distribution of subsidies among in- by public money. In other words, the aim of the analysis is to compute
dividuals. Iseki (2016) finds that the subsidies are progressive because how much of the tax-payers money that accrues to different groups of
low-income people reside in the centre where transit coverage is public transport users (as opposed to those not using the public trans-
naturally the highest compared to the funding of the system. In con- port system). This has implications also for the calculation of the pro-
trast, in a review of 12 studies, Iseki and Taylor (2002) find that transit duction cost, namely that we use the average cost per transit trip, not
subsidies are often regressive because high income people travel longer the marginal costs.
distances, travel more in peak periods and use more capital-intensive When calculating the total production cost of each transit service,
2
we therefore do not only include costs that vary with total vehicle-
Yearly number of trips on link k in period t
kilometres or vehicle-hours, but also include fixed system costs such as
k
Tkt = ijr Tijtr ijr
capital and maintenance costs for vehicles, stations and tracks. Such Average production cost of a single trip on link k in period t c = C
kt R (k ) t
dk
k Tkt dk
costs are allocated to services in proportion to vehicle kilometres and
Production cost of a single ij-trip in period t cijt =
1 k
vehicle hours. Tijt kr Tijtr ijr ckt
We acknowledge, however, that when breaking down the produc- Subsidy for an ij-trip for individual n in period t pijtn − cijt
tion cost of the transit trips in this way, we disregard two factors. First, Average subsidy accruing to a member of group N (with |N| n n
n N ijt Tijt (pijt cijt )
members)
operators are producing several products signified by spatial and tem- |N|
poral cost interdependencies. We disregard such interdependencies and

assume that the production costs of each service are independent, Hence, we calculate the production cost of one trip on a link by
which may bias the results. Second, fixed costs can be assigned to dif- allocating the total production cost of the service equally across all
ferent services in several different ways. Although we argue that the passenger kilometres on the corresponding service (within a time
most reasonable way is to assign fixed costs proportional to the vehicle period). This means that we assume that the production cost per pas-
kilometres and as vehicle hours because longer trips use the facilities C
senger kilometre R (k ) t is equal on all links k on service R within time
more, other principles are possible. One could for instance divide the k Tkt dk
period t. As discussed above another possible way would be to assume
fixed costs between travellers in proportion to the number of transit
that the production cost per person kilometre differs between links on
trips they make. Yet another possibility is to divide fixed costs equally C
the same service depending on the load factor of the link k, R (k ) t . This
among all transit users (an entry subsidy for all individuals making at Tkt k dk
least one transit trip). The principle we use implies that we assign a would mean that links with higher load factors would get a lower
proportionally larger production cost to long trips, and to individuals production cost per trip, compared to other links belonging to the same
making many transit trips, compared to the other principles suggested service, since more passengers would share the production cost.
above. Moreover, we have divided the production cost among time periods
On the other hand, the way we split the total production cost of according to produced vehicle kilometres and hours by time period, DRt
services across trips will tend to underestimate the production cost per and HRt. One could argue that a larger part of the cost than the number
trips on peripheral links of a given service, since they tend to have of vehicle kilometres should be assigned to the peak, because the
lower load factors. As explained above, we split the total cost for a overall number of vehicles is set to meet the peak supply. On the other
service proportionally across all passenger kilometres on the service. hand, the cost of staff is higher in off-peak1 and weekend periods be-
Another possible definition of the cost of a transit trip would be to take cause of supplementary pay outside regular working hours, so we as-
into account that the occupancy rate of a service varies, and define the sume that these cancel out.
cost per trip such that trips made in high-occupancy conditions have
lower production costs, since more passengers share the same vehicle. 2.2. Calculating operation costs
Our definition presumes that services have to be served in their entirety
and cannot be split into shorter sub-services. If that assumption holds, it We get trip volumes Tijr, route-link incidences δijrk and link lengths dk
is logical that all passenger kilometres share the total production costs from the output of the transport model VISUM.2 Hence, we use the
of the service equally. If this would not be the case, our assumptions transport model to determine which links that are used by different routes
will tend to underestimate the subsidy rates on peripheral links, since for trips from i to j. The transport model simulates the choice of route by
they tend to have lower load factors, and vice versa for central links. assuming that users choose the route with the lowest generalized cost in
We calculate the production cost of a trip from i to j as the sum of the transit network. However, all passengers do not choose the same route
the production cost of all links k used during the trip. A link k is the because they are as assumed to arrive at the stops randomly according to a
connection between two adjacent nodes (stations or bus/tram stops) uniform distribution. Depending on the arrival time at the bus stop, the
with a particular service (such as a bus line). Note that if two different shortest average travel time varies among routes depending on the time-
bus services run between the same two stops, these are treated as dif- tables. Therefore, the transport model simulates the number of passengers
ferent links in the analysis. A service R is a service consisting of a set of selecting each possible route from i and j, Tijr.
links. A service can be of any mode. The output from the transport model also includes the total yearly
To describe the calculation method formally, let Tijtr be the yearly production of vehicle kilometres and vehicle hours for all services, by
number of transit trips from i to j in time period t = 1, 2, 3 (peak, off- mode and time period. Tijr are broken down to time periods t by ap-
peak, weekend) using route r, and pijtn the fare for this ij-trip (equal for plying the shares of the total demand by time period. The demand-to-
all routes) for individual n (allowing for individual-specific fares, since supply ratio is very similar across time periods (Table 1). The peak
there may be discounts for e.g. students and retirees) in time period t. period has 44% of the supply and also 44% of the demand. This means
Let dk be the length of transit link k. Let δijrk be 1 if link k is part of the that the average subsidy per trip equals the peak trip subsidy. The off-
route r from i to j with the lowest generalized cost in the transit network peak period has five percentage points higher demand than supply, and
and 0 otherwise. Each link belongs to exactly one service R, such that the weekend period the other way around. Hence, off-peak trips receive
the service R includes a set of links in the network. Let R(k) be the a slightly smaller subsidy than the average weekly trip and weekend
service that link k belongs to. trips receive a slightly higher subsidy. However, these differences are
We assume independent capacity production in each line section of small and the split of trips between off-peak and weekend trip do not
the network, such that all costs for the transit system can be attributed vary between income groups.3 Hence, we neglect this difference,
to production costs per vehicle kilometre or vehicle hour, θm(R) and ηm
(R), respectively, for the mode m used for service R. Let DRt and HRt be
1
the total yearly vehicle kilometres and vehicle hours, respectively, used The off-peak includes also late nights and very early mornings.
2
The transport model VISUM uses an origin-destination matrix from the
to produce service R in time period t. Let m(R), where m∈ {bus, tram,
national Swedish transport model SAMPERS, calibrated against observed pas-
metro, commuter train}, be the transport mode used to carry out a
senger volumes, boardings and alightings.
given service R. The yearly production cost of the service R in period t is 3
If the sample is split in two income groups, high and low, according to
then calculated as CRt = θm(R)DRt + ηm(R)HRt. Table 3, high income people do a larger share of their trips in the peak.
Given this, we get. However, comparing only off-peak and weekend trips, the split is virtually
identical: 70% of these trips are made in the off-peak and 30% are made during
the weekend according to the travel survey.
3
Table 1 m
i
i m
Time period factors by for demand and supply. m = m +
m + m t R m
DRt
Share of total Share of total weekly
weekly demand supply i
m i m
m = m +
Peak (7 am–9 am, 3 m-6 pm) t = 1 44% 44% m + m t R m
HRt
Off peak (6 pm-7 am, 9 am-3 pm) 33% 39%
t=2
Weekend t = 3 23% 17% 2.3. Comparing distributional profiles of public spending
Tot 100% 100%
To summarize the distributional profile of subsidies across income

groups, we will use the concentration index (CI) (Kakwani, 1977). The
implying that the subsidy of different time periods equals the average
CI is based on the concentration curve s(x), which shows the share of
weekly subsidy. This means essentially that the timing of the trip has no
total spending accruing to the poorest x percent of the population. The
impact on the subsidy.
CI measures the total difference between the actual spending profile
The variables pijtn are taken from data from the Stockholm Public
and lump-sum spending:
Transport Administration (but the fare does not vary across time per-
iods) and Tijn are taken from travel surveys, see further Section 3. CI = 2
1
(x s (x )) dx = 1 2
1
s (x ) dx.
We now proceed by explaining the calculation of production costs 0 0
per vehicle kilometre and vehicle hours, θm and ηm. These costs of The CI is bounded to the interval (−1,1). A lump-sum spending,
course vary by mode, but not across services by the same transport where all individuals get the same amount, means that s(x) = x and
mode. They are calculated from detailed cost data acquired from the that CI equals zero. If a disproportionate share of spending accrues to
Stockholm Public Transport Administration, responsible for transit the poor, the CI is negative, and the spending profile is defined as
provision in the County. progressive. Conversely, if a disproportionate share of spending accrues
The total production cost of the transit system is 16.3 BSEK/year. Of to the rich, the CI is positive, and the spending profile is defined as
this 6.8 BSEK/year are covered by subsidies, 3.1 BSEK/year by revenues regressive.
from property rents and advertisements, and 6.4 BSEK/year by ticket The CI can be compared across scenarios, points in time, cities and
revenues (resulting in the subsidy rate4 6.8/16.3 = 42%). The total countries. It has been widely used in health economics to calculate the
cost, 16.3 BSEK/year, can be split into a direct production cost of the progressivity of healthcare subsidies and spending. To our knowledge,
transit services, 13.1 BSEK/year, and “other costs” 3.2 BSEK/year. Both it has not been applied to analyze public spending in the transport
the “direct production cost” and the “other cost” include fixed costs that sector before.
should in theory be included in our production cost. However, we The CI can be compared to the Suits index and the Gini index. The
disregard the “other costs” (−3.2 BSEK/year) and the revenues from Suits index (Suits, 1977) is used to measure the distributional profile of
property rents and advertisements (3.1 BSEK/year) simply because they taxes; transport-related applications can be found in West (2004), CPPP
cannot be broken down to services or even to modes with the in- (2007) and Eliasson et al. (2018). The Suits index is bounded to the
formation that we have access to. We will base the calculation of the interval (−1,1) just as the CI, but they differ in that the Suits index
costs and the revenues generated per trip on the production cost of the defines a neutral tax as one where everyone pays the same share of their
services (13.1 BSEK/year) and the ticket revenues (6.4 BSEK/year) income, while the CI defines a neutral spending scheme as one where
only, resulting in a subsidy rate of 52% (1–6.4/13.1). everyone gets the same amount in absolute terms. The Gini index
We have the direct production cost of the transit services (13.1 measures wealth distribution, and is bounded to the interval (0,1).
BSEK/year) separated into four modes, see Table 2. It includes the Perfect equality, where everyone has the same wealth, gives a Gini
variable cost of staff, operations and maintenance costs by mode. Some index of 0.
of these are proportional to vehicle kilometres (such as vehicle main-
tenance) or vehicle hours (such as driver costs). Also fixed cost are 3. Data
included, such as capital costs for vehicles (γm1) and stations (γm2) and
maintenance and operation costs the metro and tram tracks (γm3). Cost 3.1. Stockholm
for the railway infrastructure (which is maintained by the national
government) or roads used by buses (which are maintained by the The total population of the Stockholm County was 2.2 million in
municipalities) are however not included. Overhead costs by mode 2015. The population growth has increased in recent decades, from
(γm4) and cost items common to all modes (γm5) are divided among on around 1% per year before 2000 to over 1.5% after 2000. The county
the modes in proportion to the use of them (according to the Public consists of 26 municipalities, where the City of Stockholm is by far the
Transport administration). largest with nearly half the county's population. For purposes of pre-
As discussed in Section 2.1 we argue that it is reasonable to break sentation, we have divided the municipalities into five groups ac-
down the fixed cost γ (for vehicles, stations, tracks and overhead costs) cording to proximity to the city centre, taking not just distance but also
to services according to the produced vehicle kilometres and vehicle transport opportunities into account. The categorization is shown in
hours with the argument that the longer trips, the more tracks, station Fig. 1: the core includes Stockholm, Solna and Sundbyberg; the inner
and vehicles are used (see further discussion in the paragraph further suburbs include Lidingö, Sollentuna, Huddinge, Danderyd, Nacka and
down in this section). The fixed costs (γmi) are therefore allocated Järfälla; the outer suburbs include Botkyrka, Haninge, Tyresö, Täby; the
proportionally to vehicle hours and vehicle kilometres, and added to peripheral suburbs include Upplands Väsby, Salem, Södertälje, Ekerö,
the variable kilometre cost (αm) and variable hourly cost (βm) Upplands Bro; the periphery include Nykvarn, Sigtuna, Nynäshamn,
Värmdö, Vaxholm, Östertälje, Österåker, Norrtälje and Vallentuna. The
core corresponds roughly to the area served by the metro network, and
4
The ratio between the subsidy from the regional government and the total contains nearly half of the county's population.
costs of the system, excluding investments in physical infrastructure and op- The average income in the core is close to the regional average
eration and maintenance cost for the infrastructure for bus and commuter (Table 2), while it is higher in the inner suburbs. The outer suburbs are
trains. These costs are covered by the municipalities and the national govern- characterised by high-density housing surrounding commuter train
ment, respectively, and are therefore not included. stations, where the average income is low, and more sparsely populated
4
Table 2
Transit production costs.
Bus Tram Metro Commuter train
Capital and operations cost, M€/year

Total costs proportional to vehicle kilometres αm 110 9 20 28
Total costs proportional to vehicle hours βm 277 22 48 33
Capital cost γm1 136 31 162 87
Stations γm2 0 5 71 47
Tracks operations/maintenance, γm3 0 14 14 0
Overhead γm4 47 7 28 18
Cost common for all modes γm5 46 7 28 17
Total production per year
Total supply of vehicle kilometres per year and mode, Mh/year ( t R m DRt ) 4.71 0.13 0.31 0.13
Total supply of vehicle hours per year and mode, Mkm/year ( t R m HRt ) 119.68 4.05 10.14 7.19
Production cost per vehicle km and vehicle h

Vehicle cost per hour, €/h (θm) 94 527 857 973
Vehicle cost per km, €/km (ηm) 1.5 6.7 11 15
Average cost per passenger km, €/km/pass. 0.32 0.26 0.15 0.11
Average cost per seat km, €/km/seat 0.097 0.084 0.065 0.031
Fig. 1. Stockholm County, with categorization of municipalities. Background data ©2017 Google.
areas with single family houses and higher average incomes. The per- charge was increased and an additional charging point was added in
iphery is dominated by single family housing, and the income increases 2016, which reduced traffic across the cordon even further (Börjesson
again. and Kristoffersson, 2018). Congestion charges, fuel taxes and parking
Transit trips make up 31% of all trips in the county (47% of mo- charges together internalize much of the external effects from driving.
torized trips), but this varies widely in the county. The transit share is Hence, subsidizing as a second-best pricing of road traffic externalities
highest for trips to and from the inner city, where it reaches 80% for is much less justified in Stockholm than in most other comparable cities
work trips. (Börjesson et al., 2017, 2018).
Trip counts show that the number of transit boardings has been
increasing at the same rate as the population, and faster than the 3.2. The travel survey
number of car trips to and from the regional centre. Since the 1950s,
Stockholm has followed a transit-oriented planning strategy (Cervero, The basis for calculating distributional effects is a large cross-sec-
1995; Stockholm City Planning Administration, 2009), meaning that tional travel survey, representative for trips and citizens in Stockholm
land use is concentrated around stations and along transit corridors. County. Using a travel survey is preferable to breaking down data from
This in an important explanatory factor of the high transit share com- a transport model by population group, since all correlations between
pared to many other cities. socioeconomic characteristics and travel patterns are accurately re-
In the inner city the number of car trips has declined since 2005. presented, provided of course that the sample is representative and
One of the main reasons is that Stockholm introduced congestion large enough.
charges in 2006, designed as a toll cordon around the inner city The travel survey was conducted among Stockholm County re-
(Eliasson, 2008). This reduced traffic across the cordon persistently by sidents September–October 2015. The respondents were a random
around 20% (compared to pre-2006 levels) during weekdays, and sample of Stockholm County residents aged 16–84, who were asked to
traffic levels has remained approximately constant ever since. The peak report all trips made during a randomly assigned survey day. The
5
Table 3
Population and trip characteristics.
# ind. sample % ind. Sample # transit trips/ # trips/ Average trip length all Average trip length Average income per household
ind. ind. trips transit trips SEK/m
Monthly gross income (SEK)

≤ 10,000 3677 8% 0.59 1.29 14.00 14.67 7741
> 10,000 & ≤ 20,000 5090 11% 0.88 2.51 16.29 17.49 15,152
> 20,000 & ≤ 30,000 5810 13% 0.85 2.61 16.40 18.21 22,833
> 30,000 & ≤ 40,000 10,727 24% 0.81 2.90 15.78 17.74 32,566
> 40,000 & ≤ 60,000 7410 16% 0.72 2.67 16.03 17.92 47,458
> 60,000 & ≤ 80,000 3691 8% 0.43 1.70 14.85 16.16 67,720
> 80,000 3749 8% 0.36 1.46 16.17 16.21 127,079
Not reported 5311 12% 0.63 1.80 17.20 17.81 –
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482
Occupation
Employed 28,748 63% 0.74 2.59 15.89 17.81 43,622
Student 5069 11% 1.26 2.22 16.18 18.23 38,529
Retired 7971 18% 0.34 1.58 18.54 15.14 39,663
Other 3679 8% 0.79 1.82 15.24 16.81 30,257
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482
Age
16–24 y 6212 14% 1.13 2.13 16.47 17.62 44,921
25–39 y 12,999 29% 0.84 2.57 14.21 16.78 34,097
40–64 y 18,359 40% 0.61 2.48 16.67 18.72 45,866
65–84 y 7897 17% 0.36 1.63 18.54 15.14 41,667
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482
Gender
Women 22,774 50% 0.82 2.36 14.71 17.25 39,984
Man 22,693 50% 0.59 2.25 17.39 17.89 42,944
Total 45,467 100% 0.70 2.31 16.0 17.51 41,482
Residential area
Core 21,723 48% 0.87 2.39 12.7 13.4 41,232
Inner suburbs 8365 18% 0.65 2.37 15.6 17.5 46,420
Outer suburbs 5791 13% 0.58 2.15 17.9 22.2 40,730
Peripheral suburbs 4164 9% 0.46 2.13 21.5 28.4 36,802
Periphery 5425 12% 0.42 2.16 26.2 37.3 39,254
Total 45,467 100% 0.70 2.31 16.0 17.51 41,482
respondents could choose between a mail-back paper survey and a web- although the difference between income groups is small (note that daily
based survey. The final sample was weighted to be representative for trip frequencies in the table refer to all days, not just weekdays). The
the county population with respect to age, gender and residential lo- mid-income groups also make slightly longer trips, both with transit
cation. The sample of individuals responding to the survey matches the and in general. Students make considerably more transit trips than
census statistics with respect to employment and driving licence shares. other groups. On average, women make shorter transit trips than men,
The survey days are uniformly distributed among all days of the week but slightly longer trips with other modes (although the latter differ-
(workdays and weekends). The response rate was 35%, and the final ence is small). The largest differences in travel patterns can be seen
sample included 45,467 respondents making 102,588 trips, of which between residents in different areas. Residents in the more central areas
31,961 were transit trips. make slightly more trips overall, many more transit trips, and con-
siderably shorter trips.
3.3. Population and trip characteristics Figs. A.1 and A.2 show how the average income and average transit
trip frequency, respectively, varies in the region. The incomes tend to
Table 3 shows population characteristics based on the travel survey. be highest in the core and inner suburbs, particularly north of the core.
The respondents report household income in 11 categories, family The transit trip frequency tends to be highest in the core and along the
status, gender, age, occupation: employed, student, retired, others commuting train and metro corridors.
(unemployed, sick leave or parental leave). We approximate the income
per individual by dividing the mid-point of the household income in- 4. Distributions of subsidies
terval reported by the respondents by the number of adults in the
household. Note that for many of the students and the young adults This section describes the distributional profile of subsidies given
(16–24 years old) the computation of the individual income from the the current fare structure, while the next section (Section 5) compares
household income is misleading or unreliable because many of them this to alternative fare structures. The current fare structure is described
live with their parents. The students' monthly income will also vary in 4.1 and the distribution of the trip production costs is described in
with the season (i.e. they might have a larger monthly income during 4.2. Based on the fare and the trip production cost, the subsidy per trip
the summer if they are working then) which also makes the meaning of for all reported trips in the travel survey is computed. Section 4.3 shows
the monthly income difficult to interpret. how the subsidy per person and per trip is distributed across population
The number of transit trips is highest for the mid-income groups, groups using descriptive statistics. Since the current fare is hardly
6
Table 4
Distribution of trip production costs (SEK/trip), by population group.
1st quartile Median 3rd quartile Mean Share of
trips
All trips 15.4 26.6 42.9 33.9 100

Income groups
Low income (< 40 15.5 26.5 42.9 33.8 68%
kSEK/month)
High income (≥ 40 14.8 25.2 41.1 32.6 32%
kSEK/month)
Occupation
Work 15.7 26.5 43.3 34.2 69%
Student 16.8 28.2 42.9 35.0 19%
Retired 12.3 24.3 42.0 31.8 7%
Others 11.3 20.7 38.0 28.5 4%
Main mode
Bus −7.7 3.8 23.6 14.0 22%
Metro −5.3 4.3 18.3 10.0 51%
Commuting train/ 5.2 18.8 34.0 25.0 27%
tram
Residential area
Core 12.3 21.1 33.3 25.4 62% Fig. 2. Cumulative distribution of subsidies per trip.
Inner suburbs 21.5 31.6 45.7 36.4 17%
Outer suburbs 26.4 38.1 51.6 43.3 9%
Peripheral suburbs 33.4 49.6 68.3 54.9 5%
Periphery 34.3 59.5 98.0 76.9 7% trip. The distribution is skewed: while the median production cost per
Type of house trip is just under 27 SEK, the mean is 34 SEK, the 75-percentile is nearly
Single-family house 22.2 35.2 52.7 44.0 24%
Multi-family house 13.9 24.0 39.2 30.6 76%
43 SEK, and the tail of the distribution stretches far beyond 100 SEK per
trip. At the same time, there are also many cheap trips: almost 25% of
trips have production costs below 15 SEK.
Table 4 shows production costs per trip for two income groups (low
and high). We restrict the presentation to two income groups because,
differentiated across trips, the current distributional profile of transit remarkably, production costs per trip vary very little by income group.
subsidies is almost entirely driven by three factors: differences in pro- High-income groups make slightly longer trips on average, but this is
duction cost per trip, differences in transit trip frequencies, and fare counteracted by low-income groups using more services with low load
discounts for retired and students. factors. Together, the below-average income group has a slightly higher
production cost per trip than the highest income group. Because the
4.1. Fare structure fare is flat, the distribution of the production cost is just a parallel shift
of the distribution of the subsidy per trip, plotted in Fig. 2 to Fig. 4.
As in many cities, fares in Stockholm have a low degree of differ- Students have the highest average production costs, followed by
entiation. The only substantial differentiation is the discount for stu- workers, since these two groups make longer transit trips. The differ-
dents and retired. To some extent, travel cards also introduce a difference between occupation groups is relatively small, however.
entiation between occasional and habitual transit users. But apart from The subsequent rows of Table 4 show how the production costs vary
that, fares are uniform across distance, time of day, area and transport with the main mode of the trip. Trips with main mode metro have the
mode. lowest average production costs, but trips with main mode bus have the
Fares are paid either with single-trip tickets or with travel cards lowest median production costs. Production costs vary more for bus
which allow unlimited travel during a week, month or year. Travel trips than for metro trips (the difference between the 1st and the 3rd
cards are more common than single-trip tickets: 82% of all trips are quartile is larger for the former), due to larger variation in the load
paid for by travel cards. Fares are discounted for students and retired, factors.
who pay 38% less. The price for single-trip tickets vary depending on Track-based trips (with trams and commuting trains), are the most
type of payment (e.g. cash is more expensive than prepaid cards); the expensive to produce, with a median production cost approximately
average single-trip full fare is 28 SEK (10 SEK ≈ 1€). Holders of travel four times higher than the other modes. This is due to the longer
cards make 40 trips per month on average (this does not vary among average trip distances with these modes. On the other hand, commuter
population groups), which implies an average fare per trip for travel trains have the lowest average cost per passenger-kilometre and seat-
card holders of 20 SEK (without discount). Taking single-trip tickets kilometre of all modes (see Table 2).
and travel cards together, the average fare for a non-discounted trip is The segmentation that really matters is by residential area (Table 4).
22 SEK. Taking discounts into account, the average fare for all types of There are huge and consistent differences in trip production costs de-
passengers and payments is 19 SEK. pending on where in the county passengers live: the further away from
the centre, the higher is the production cost per trip. Fig. A.3 shows a
4.2. Distribution of trip production costs map of the average production cost per trip by origin zone. The table
shows that the trip production costs in the periphery are almost three
This section presents differences in production cost per trip across times higher than in the core. This pattern is confirmed by the map. The
several population groups. The subsequent section presents subsidy per differences are mostly due to passengers in more peripheral areas
trip and per person by subtracting fares from production costs and making longer transit trips. Moreover, average load factors in periph-
taking transit trip frequencies into account. eral areas are also slightly lower, but this difference is rather small:
Table 4 presents mean and quantiles of production costs per transit production cost per kilometre is just 8% lower in the core compared to
7
Table 5 Table 6
Distribution of trip production costs (SEK/trip), by residential are and type of Subsidies by population group.
house.
% of Average Average # transit Average
Residential area 1st quartile Median 3rd quartile Mean Shar of trips population production subsidy trips per subsidy
cost per trip per trip person per person
Single-family house
Core 18.3 29.1 41.2 12.2 6% Income (SEK/month)
Inner suburbs 21.3 30.7 44.8 17.4 8% ≤ 10,000 8% 33.8 18.5 0.6 10.9
Outer suburbs 26.4 38.3 53.0 43.8 4% > 10,000 & 11% 31.4 13.8 0.9 12.2
Peripheral suburbs 32.8 49.8 70.9 55.4 2% ≤20,000
Periphery 33.0 58.4 102.5 75.7 4% > 20,000 & 13% 34.5 15.1 0.9 12.9
Total 3.6 17.4 34.3 25.5 24% ≤30,000
> 30,000 & 24% 34.5 14.4 0.8 11.7
Multi-family house
≤40,000
Core 11.9 20.4 31.9 5.5 55%
> 40,000 & 16% 33.7 13.8 0.7 10.0
Inner suburbs 21.7 32.4 46.3 17.9 10%
≤60,000
Outer suburbs 26.3 37.7 50.7 42.8 5%
> 60,000 & 8% 30.7 11.0 0.4 4.7
Peripheral suburbs 34.4 49.2 66.3 54.4 3%
≤80,000
Periphery 37.3 60.8 92.1 78.4 3%
> 80,000 8% 30.5 10.9 0.4 4.0
Total −5.6 5.1 20.7 11.4 76%
Not reported 12% 38.8 22.2 0.6 14.0
Total 100% 33.9 14.9 0.7 10.5
Occupation
Employed 63% 34.2 13.2 0.7 9.8
the periphery. (Note that the core encompasses a rather large area, Student 11% 35.0 22.1 1.3 27.7
Retired 18% 31.8 17.0 0.3 5.7
much larger than e.g. the inner city; it coincides roughly with the extent
Other 8% 28.5 6.5 0.8 3.0
of the metro network.) Total 100% 33.9 14.9 0.7 10.5
Note however, that if we had chosen to allocate the fixed cost for
Age
vehicles, stations and tracks according to number of trips or some other 16–24 y 14% 35.5 21.2 1.1 23.9
rule, and not according to the produced vehicle kilometres and vehicle 25–39 y 29% 31.5 11.1 0.8 9.3
hours, the production cost for long trips would be proportionally 40–64 y 40% 36.0 14.5 0.6 8.9
smaller. Still, all reasonable rules used to assign the fixed cost would 65–84 y 17% 31.2 16.4 0.4 5.9
Total 100% 33.9 14.9 0.7 10.5
imply that the production cost would be substantially higher for long
trips. Gender
Women 50% 33.5 14.6 0.8 11.9
Now, high income people often reside in single-family houses with
Man 50% 34.4 15.3 0.6 9.0
lower densities, often implying lower occupancy rates. The final two Total 100% 33.9 14.9 0.7 10.5
rows of Table 4 indicate how production costs differ between passen-
Residential area
gers living in different types of houses.5 They indicate that trips made Core 48% 25.4 6.2 0.9 5.4
by passengers living in single-family houses have an average production Inner suburbs 18% 36.4 17.7 0.7 11.6
cost of more than twice the production cost of trips made by passengers Outer suburbs 13% 43.3 24.6 0.6 14.4
living in multi-family houses. However, Table 5 shows the same sta- Peripheral 9% 54.9 36.7 0.5 17.0
suburbs
tistics, controlling for residential area. It shows that when controlling
Periphery 12% 76.9 57.9 0.4 24.4
for residential area, the differences between type of house vanishes Total 100% 33.9 14.9 0.7 10.5
outside the core. Among trips made by residents of the core – making up
62% of the trips – the difference remains: trips made by residents in the
core cost on average more than twice as much to produce as the trips
made by residents in multi-family houses. This difference is related to
density. Links with low occupancy rates requires higher subsidies. This varies substantially across residential areas. The third column shows
shows than not only distances, but also densities are important to take average subsidy per trip.6 For the purposes of this study, it is convenient
into account when analysing the distribution of subsidies between dif- that the only variation in Stockholm fares is the discount for students
ferent groups. and retired. This makes results easy to interpret: it means that the
variation in average subsidies per trip essentially only depends on the
variation in production costs and whether the passenger is a student/
4.3. Distribution of subsidies retired or not. The fourth column shows average transit trip frequencies
per group, which results in the last column, average subsidy per person
The subsidy per trip is computed as the production cost minus the by group.
fare. Table 6 shows how subsidies are distributed across population The first part of Table 6 shows subsidies per income group. The
groups. The last column shows subsidy per person by group. Table 6 subsidies turn out to be mildly progressive; the concentration index (see
shows how the distribution of subsidy per person depends on how three Section 2.3 and Section 5.1) is −0.217. This is mainly due to lower
factors vary: production costs per trip, transit trip frequencies, and transit trip frequencies in the top income quintile (over 60,000 SEK/
fares. The second column of Table 6 includes the production costs per month), while differences in the rest of the income range are small. In
trip. As shown in the previous section, production cost per trip is similar
across income groups and gender, varies slightly with occupation, and
6
Note that the average subsidy rate for trips in the sample is 44% (14.9/33.9)
5
In the travel survey, there is no variable for house type, but there is one according to Table 4. This differ from the total subsidy rate on the aggregate
variable asking the respondent “do you have your own driveway by your level which is 52%, calculated from the production costs (13.1 BSEK/year) and
house”. Since most single-family houses, and only such house, have their own ticket revenues (6.4 BSEK/year), see Section 3.1. The lower subsidy rate per trip
driveway, this is a good proxy for single-family house. This variable matches in our sample is partly due to sampling error, but also because children (who
well with the share of single-family houses in each of the residential areas of the pay low ticket price or are free of charge and therefore have a high rate of
county (see Table 4). subsidies) are not included in the sample.
8
income groups below the top quintile, the transit trip frequency lies
around 0.8 trips per person and day, but in the highest quintile it drops
to around half of that. Production costs per trip are also slightly lower
in the highest income ranges. This is because high-income groups are
overrepresented in central areas, which means that their average trip
length is shorter and that they travel on services with high load factors,
implying lower production costs per trip.
In the rest of the income range, trip frequencies and production
costs are broadly similar. Overall, this leads to subsidies per person less
than half for the top income quintile compared to the rest of the income
range. For the rest of the income groups, subsidies per trip and per
person are similar. The bottom income group – with a high share of
students and retired – receives a considerably higher subsidy per trip
(due to discounts), but on the other hand makes fewer trips, resulting in
a subsidy per person on par with the other low and middle-income
groups.
Turning to occupation, the variation is larger. Students are the big
winners, getting nearly three times more subsidies per person than
employed persons. This is partly because students make more transit
trips than any other group, and partly because of the student discount.
Fig. 3. Cumulative distribution of subsidies per trip by income group.
The higher transit trip frequency explains a little more than half of the Blue = high incomes, red = blue incomes. (For interpretation of the references
difference in subsidies per person between students and employed, and to colour in this figure legend, the reader is referred to the web version of this
the student discount a little less than half. Retired and others (un- article.)
employed, sick leave or parental leave) receive less subsidies – a half
and a third, respectively, of what the employed get. This is partly be-
cause they make fewer transit trips, but also because the average pro-
duction cost is lower and the average fare higher (despite the discount the huge geographic differences. For example, residents in the per-
for retired), since fewer of them use travel cards. iphery get almost five times more subsidies per person than residents in
As to age groups, results are as expected, given the findings for the core. Differences are substantial also when comparing residents in
students and retired persons: young people get the most subsidies, be- the inner suburbs to residents in the core: the former get more than
cause of the student discount and their high trip frequency, while old twice as much subsidies. The map in Fig. A.4 shows how the average
people get the least subsidies despite the retiree discount, since their subsidy per resident and day varies on an even more detailed geo-
average fare is higher and they make fewer trips. Young adults graphical level. It confirms that the average resident in the inner city
(25–39 years) have lower production costs per trip but make more generates a profit, whereas other residents in the core receives a small
transit trips than older adults (40–64 years). A likely explanation is that subsidy. Looking at subsidies per trip, differences are even bigger: for
the older group to a larger extent live in single-family houses and hence example, the subsidy per trip is nearly ten times higher for residents in
further from the centre. Since these effects counteract each other, the periphery than for residents in the core.
however, subsidies per person are similar for the two groups. Women Again, the rule of allocating the fixed cost for vehicles, stations and
get an appreciably higher subsidy per person than men (around 30% tracks in proportion to produced vehicle kilometres and vehicle hours is
more), because they make more transit trips per person. not the only possibility. Other possible rules would imply that the
However, all differences discussed above are small in comparison to production cost, and therefore the subsidy, for long trips (or for
Table 7
Share of trips with high and low subsidies.
Share of trips with production cost lower Share of trips with production cost more than Share of trips with fare more than three times
than the fare (negative subsidy) three times higher than the fare higher than the production cost
All trips 34% 16% 7%

Income groups
Low income (≤20 kSEK/ 34% 15% 6%
month)
High income (≥ 40 kSEK/ 38% 13% 9%
month)
Occupation
Employed 37% 11% 7%
Student 18% 32% 3%
Retired 30% 21% 7%
Other 55% 6% 13%
Residential area
Core 45% 8% 9%
Inner suburbs 20% 17% 3%
Outer suburbs 14% 23% 2%
Peripheral suburbs 10% 42% 3%
Periphery 13% 53% 3%
9
this section, we explore the distributional profiles of some alternative

fare structures. Section 5.1 focuses on how the fare structure impacts
the progressivity of the transit subsidies. As discussed in Section 2.3, the
progressivity of public spending (in our case subsidies) across income
groups can be defined and computed by the concentration index. The
index lies in the interval (−1,1). A negative index means that the
spending profile is progressive (poorer groups get a larger share of total
spending) and vice versa.
Section 5.2 focuses on how the alternative fare structures impact the
distribution of the transit subsidies across residential areas. To avoid
getting lost in detail, we will not present results in other dimensions
than income and residential area.
5.1. Progressivity of different fare structures
Table 8 shows concentration indices for seven alternative fare

structures. They are computed under the assumption that the travel
behaviour says unaffected by the changes in fare structure. As long as
Fig. 4. Cumulative distribution of subsidy per trip by residential area. the changes in the fares are reasonably small, this assumption should be
Black = core, red = inner suburbs, blue = outer suburbs, green = peripheral appropriate. However, the assumption can be questioned for large
suburbs, pink = periphery. (For interpretation of the references to colour in this changes in fares, such as assuming zero fares.
figure legend, the reader is referred to the web version of this article.) The first row of Table 8 (“Base”) shows that for the current fare
structure in Stockholm, subsidies are mildly progressive. As shown in
the previous section, this is partly due to the fare discount for students.
individuals making many transit trips) would be relatively smaller. It is also due to the lower transit trip frequency for the top income
The results in Table 6 only shows average subsidies per group, but quintile. The former effect is illustrated in the second row, showing that
now we turn to the distribution of subsidies in the full sample and the concentration index increases to −0.187 (i.e. less progressive) if the
within the groups. Fig. 2 and Table 7 show that the distribution of fare discount for students and retired is removed.
subsidies exhibits a large variability. The first column of the table shows Reducing fares is often advocated as a policy with positive dis-
the share of trips that are not subsidized (hence yields a financial sur- tributional effects. However, the third and fourth rows show that this is
plus), since production costs are lower than the fare. The second not true in Stockholm. Reducing fares by 10%, or all the way down to
column shows the share of trips with a higher subsidy rate than 2/3. zero, implies less progressive subsidies, because this effectively reduces
The third column shows the share of trips generating a profit higher or takes away the discounts for the students and the retired. However,
than 2/3 of production cost. Table 7 shows that 34% of trips are not reduced fares would not necessarily be less progressive in a city where
subsidized, while 16% have a subsidy rate higher than 2/3 and 7% of there the transit trip frequency differed more between income groups.
the trips generate a profit higher than 2/3. Then, the reduced fares would benefit the low-income groups relatively
Broadly speaking, Table 7 shows the same differences across groups more than high income groups than what is the case in Stockholm.
as the results in Table 6. Differences across income groups are small From an efficiency point of view, it is obvious that social gains can
(see Fig. 3). A majority of the trips of others (including unemployed and be made by moving from flat fares to differentiating fares in various
people on sick leave or on parental leave) yield a surplus to the op- dimensions to account for variations in e.g. crowding, production costs
erator, and 13% of their trips generates a profit higher 2/3 of the dis- and externalities. Moreover, moving from travel cards allowing un-
tribution cost. However, only 18% of the students' trips generates a limited trips to single-trip fares would also allow fares to more accu-
surplus. Geographic differences are again substantial (see also Fig. 4). A rately reflect the marginal cost (i.e. the social cost) of the trip, resulting
majority of the trips made by the residents of the periphery have a in social efficiency gains.
subsidy rate higher than 2/3. However, more differentiated fares are often resisted with the ar-
gument that this would have regressive distributional effects. The last
three rows show that this argument is not valid in Stockholm: the
5. Alternative fare structures concentration indices remain virtually unchanged. The three fare
structures analyzed in the three rows are constructed such that the
The previous section presents results for a current fare structure – aggregate fare revenues are equal to the base case (assuming no
essentially a flat-fare system with discounts for retired and students. In changes in travel behaviour).
In the “No travel cards” fare structure, travel cards are abolished,
and all trips are paid for with a single-trip fare, chosen such that the
Table 8
Concentration indices for seven alternative fare structures.
total revenues remain unchanged but such that the students and retired
still pay 38% less. This would in itself increase the social efficiency of
Fare structure Concentration index system, but more importantly it makes it easier to introduce other kinds
Base (flat fare with student+retired discount) −0.217 of fare differentiation, such as peak/off-peak differentiation or distance
Base without student+retired discount −0.187 differentiation. As it turns out, there are no appreciable impacts on the
10% reduced base fare −0.209 distributional effects across income groups (or any other population
Zero fares −0.177 groups) of abolishing travel cards and replacing them with a revenue-
No travel cards, only single-trip fares −0.214
neutral single-trip fare. One reason for this is that the share of travellers
Same subsidy rate for all trips −0.205
Distance-based fare −0.203 with travel cards and the transit trip frequencies are so similar across
income groups. Moreover, many retirees and others (unemployed, sick
10
Table 9
Distribution of subsidies across income groups for three alternative fare structures (same aggregate revenue).
Monthly gross income (SEK) BASE Same subsidy rate for all trips Distance-based fare
Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person
Not reported 22.2 14.0 19.9 12.6 20.4 12.9

≤ 10,000 18.4 10.9 18.6 10.9 20.0 11.8
> 10,000 & ≤ 20,000 13.8 12.2 14.7 13.0 14.7 13.0
> 20,000 & ≤ 30,000 15.1 12.8 14.6 12.5 14.2 12.1
> 30,000 & ≤ 40,000 14.4 11.7 14.0 11.4 13.5 10.9
> 40,000 & ≤ 60,000 13.8 9.9 14.1 10.2 14.5 10.4
> 60,000 & ≤ 80,000 11.0 4.7 12.7 5.5 13.0 5.6
> 80,000 10.8 4.0 12.9 4.7 13.8 5.0
Total 14.9 10.5 14.9 10.5 14.9 10.5
leave or parental leave) make so few transit trips per month that they The two fare structures constant subsidy rate and distance-based
cannot benefit from the travel card deal. fares result in a similar spatial distribution of the subsidies, contrasting
The next row shows the concentration index of a fare where all trips that of the base structure. Distance-based fares imply similar subsidies
get the same subsidy rate (again chosen such that the total revenues per trip and per person in all residential areas. Moreover, constant
remain unchanged). This is of course not necessarily an efficient fare, subsidy rate implies similar subsidies for all residential areas, but re-
but it might be a fairer structure. Interestingly, this structure has vir- sidents of the periphery still get slightly higher subsidies than the core.
tually the same distributional profile as the base structure; the con- Fig. A.5 confirms the results of Fig. 5 but shows and even larger
centration index changes marginally. The subsidy per trip and per spatial variation of gains and losses of the constant subsidy rate fare
person by income group for this fare structure is presented in Table 9. structure in all areas. Note also that Fig. A.2 indicates the spatial pat-
The subsidy per trip and per person is slightly higher than in the base tern of the gains and losses of a uniform 10% fare reduction or zero
structure for the bottom and the top income quintile, but the effect is fares, since these are proportional to the spatial variation of the number
small. We can conclude that moving from a fare structure where sub- of transit trips per person and day.
sidy rates vary widely to one where they are uniform does not change The focus of this paper is not to design fares that optimize social
the distributional profile of subsidies appreciably – and hence, dis- efficiency, considering road traffic externalities, crowding, and econo-
tributional concerns are not an argument against increased spatial mies of scale and density etc. Our focus is to analyze the distributional
differentiation of fares. profiles of subsidies and we have found that the periphery gets many
The same conclusion is reached when analysing the last fare struc- times higher subsidies. A relevant question, however, is whether there
ture, where fares are proportional to trip distance (still revenue neu- are arguments that might potentially justify from an efficiency point of
tral). Again, the centration index and the distribution of subsidies view the current subsidy structure with its extreme differences between
across income groups remain virtually unchanged, which can be seen in the core and the periphery. Since this is not the focus of the paper, we
the last row of Table 8 and the leftmost columns of Table 9. constrict ourselves to listing a number of potentially relevant arguments
and leave exploration of their validity for future research.
It turns out that there are arguments both in favour of and against
5.2. Distribution of subsidies across residential areas having higher subsidies in peripheral areas:
In Section 4.3 we show that subsidies vary hugely by residential - Crowding and capacity constraints are higher in the core, at least in
area given the current flat fare. Residents in the periphery get subsidies the peak, implying a higher marginal user cost there. This supports
per person and per trip which are several times larger than residents in having lower subsidies in the central areas.
inner areas. Changing from the initial flat fare to a constant subsidy - Economies of density, i.e. the Mohring effect (Mohring, 1972), are
rate, or to a distance-based fare, has considerable spatial distributional presumably lower in the core due to higher frequencies. This also
effects, despite the marginal effect on progressivity. Results are shown supports having lower subsidies in the central areas.
in Table 10 and Fig. 5. Fig. A.5 shows a map of the gains and losses per - On the other hand, road traffic externalities are higher in central
resident and day of changing to fares resulting in the same subsidy rate areas in Sweden (Swedish CBA Guidelines, 2018). Even if they are to
for all trips.
Table 10
Distribution of subsidies across residential areas for three alternative fare structures (same aggregate revenue).
Residential area BASE Same subsidy rate for all trips Distance-based fare
Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person
Core 6.2 5.4 11.0 9.6 12.0 10.4

Inner suburbs 17.7 11.6 16.1 10.6 16.9 11.0
Outer suburbs 24.6 14.4 19.1 11.2 16.4 9.6
Peripheral suburbs 36.7 17.0 25.4 11.8 21.4 9.9
Periphery 57.9 24.4 33.2 14.0 29.2 12.3
Total 14.9 10.5 14.9 10.5 14.9 10.5
11
Fig. 5. Subsidy per person with three alternative fare structures.
large extent internalized through congestion charges and parking social efficiency of the transit system – is often dismissed with the ar-
charges they might not be fully internalized even in Stockholm, and gument that this would hurt low income groups. However, few studies
therefore this tends to support having higher subsidies in central before this one has explored the redistribution effects taking into ac-
areas. In cities without congestion charges this argument would be count the variation in subsidies across links and trips in the network,
stronger. and how this would change with increasing differentiation of the transit
- Higher subsidy rates for trips from the periphery to the regional fares. Our results of course pertain to Stockholm, so our specific con-
centre, where most jobs are concentrated, might be a way to com- clusions cannot be extrapolated to other cities without caveats.
pensate for income-tax wedges on the labour market. This would However, the purpose of the present paper is also to present a metho-
tend to improve matching by decreasing access costs between dology and framework that can then be applied in other contexts, and
workers and jobs. results can then be compared.
- Having higher subsidy rates for residents in peripheral zones can be A key methodical issue has been to break down the transit system's
a way to reduce the differences in attractivity across residential production cost to average production cost per trip. When breaking
zones, making centrally located housing more affordable and per- down the costs to trips we have made two simplifications which impact
ipheral locations more attractive for residents and eventually con- the results. First, for simplicity we disregard that operators are produ-
structors. In fact, most transit investments in Stockholm historically cing several products with spatially and temporally cost inter-
have been motivated by opening up new areas for housing con- dependencies. Second, some cost can reasonably be assumed to be
struction. The population in the Stockholm region has been growing variable and proportional to the vehicle kilometres (such as vehicle
rapidly over years and is still growing, and there is a substantial maintenance) or vehicle hours (such as driver costs) of the service.
shortage of housing, especially cheap housing. Since the cost for There are also some fixed costs for vehicles, stations and tracks. There
housing construction for logistical reasons increases the denser the is, however, no objective way method of assigning the fixed costs for
area is, trying to make ever more remote parts of the region at- vehicles, stations and tracks to different services. Although we argue
tractive for housing construction by subsidizing transport can in that the most reasonable way is to assign the fixed cost proportional to
principle be a sensible policy. However, this urban development has the passenger kilometres and passenger hours because longer trips used
also contributed to suburban transit-oriented sprawl (Cervero, these services more, other rules are possible. Our choice of rule implies
1995), which is supported by the higher transit subsidies to re- that that we assign a proportionally larger production cost, and thereby
sidents in the periphery. This highlights the downsides of the cur- subsidy, to long trips compared to most other possible rules. On the
rent fare system essentially promoting urban sprawl. other hand, the way we split the production cost across trips (by allo-
cating the total production cost of the service equally across all pas-
As pointed out above, we cannot say to what extent any of these senger kilometres on the corresponding service) will tend to under-
arguments are valid arguments for the high subsidy rates in peripheral estimate the production cost on peripheral links, since they tend to have
zones; exploring that would require separate studies. However, our lower load factors, and thereby overestimate the subsidies of more
understanding of Swedish transport policy is that they all (valid or not) central and short trips.
are considered to some extent when setting transit fares. Our analyses of transit subsidies in Stockholm show that transit
subsidies are mildly progressive, to a large extent due to discounts for
6. Conclusions students and retired, but also because the citizens in the top income
quintile make fewer transit trips per person. Still, the progressivity is
Governments spend vast sums on transit subsidies, often based on weak because a wide range of income groups get roughly equal sub-
the argument that it is an effective income redistribution policy in- sidies. As a policy for redistribution among income groups, hence,
strument. Conventional wisdom seems to be that spending money on subsidizing transit is not an effective policy. Moreover, changing the
transit subsidies is a progressive policy, since it is assumed that most of fare structure from the current flat-fare system to differentiated fares
the money go to low-income groups. Moreover, suggestions to differ- (proportional to trip distance or constant subsidization rate) does not
entiate transit fares – which has a considerable potential to increase the impact the progressivity of the subsidies. Hence, concerns about
12
regressive distributional effects is hardly a valid argument against dif- slightly higher subsidies.
ferentiating transit fares. Moreover, we find that travel cards do in fact This begs the question if there is a logical reason why current sub-
not benefit low-income groups. sidies increase so much with the distance from the regional core. The
Students and retirees enjoy discounted fares in Stockholm, and this pattern is very consistent and is just not about the periphery: subsidies
has an appreciable progressive effect: without these discounts, the increase quickly and monotonically all the way from the regional centre
concentration index would change from −0.22 to −0.18. Students get outwards, so even the difference between the core and the inner sub-
by far the highest subsidy per person, partly because of the discount, urbs is substantial. Political economy reasons seem unlikely, since re-
and partly because they make many and long trips. Retirees and others sidents in the core make up a majority of voters in the county, so a
(unemployed, sick leave or parental leave), however, get the lowest proposal to differentiate fares proportional to trip distance, for ex-
subsidy per person of all occupancy groups despite the subsidy, partly ample, would get a majority of voters behind it (assuming they are
because they make few transit trips, and partly because fewer of them voting according to self-interest).
have travelcards and hence pay a higher average fare. There may be good reasons for this subsidy structure, for example
By far the largest distributional effect is between residential areas. increasing the amount of affordable and attractive housing, or im-
The difference in subsidies per person and per trip between residential proving matching on the labour market, but exploring whether these
areas is huge. For example, residents in the periphery get almost five are valid arguments is out of the scope of this paper. On the other hand,
times more subsidies per person as residents in the core. Even com- the current subsidy structure clearly conflicts with another common
paring adjacent areas, differences are substantial: for example, residents argument, namely that transit subsidies are justified as a second-best
in the inner suburbs get more than twice as much as residents in the pricing of road traffic externalities, since these largest in central areas.
core. And within the core, the subsides varies between residents in It is also conceivable that voters and decision makers are not quite
multi-family houses and single-family houses: the average production aware of the actual distribution of subsidies across income groups or
cost of trips for the latter passengers are higher due to lower densities. residential areas. Analyses like the one presented in the present paper
Differences get even bigger for subsidies per trip: the subsidy per trip is can then hopefully inform the debate.
nearly ten times higher for residents in the periphery than for residents
in the core. This again underscores that the distributional profile of Author contribution statement
transit subsidies depends on the fare schemes and on where high- and
low-income groups live, in the city or suburbs. This is probably a main All authors have contributed in all parts of the analysis.
determinant of the distribution of transit subsidies in the city.
Differentiating the fares by making them proportional to trip dis- Acknowledgements
tance or setting a constant subsidy rate for all trips would of course
imply a more uniform spatial distribution of the subsidies. These two The VTI author acknowledges the financial support by VINNOVA
fare structures yield subsidies per person and per trip that are broadly and K2 Sweden's national centre for research and education on public
similar across residential areas, although the outermost areas still get transport.
Appendix: More tables
Municip. Index Mean 1st q. Median 3rd q. Pay more than twice actual cost Pay more than actual cost Pay less than 1/3 of actual cost
Stockholm 80 24.4 10.9 19.4 32.3 34% 69% 1%

Solna 84 25.6 13.2 20.2 30.1 28% 71% 2%
Sundbyberg 83 26.1 15.6 23.9 33.2 19% 65% 0%
Nykvarn 40 28.2 7.5 15.1 30.3 47% 69% 6%
Lidingö 86 30.2 18.8 26.0 36.6 11% 57% 2%
Huddinge 26 32.7 20.9 29.5 41.7 9% 46% 1%
Danderyd 62 34.7 24.0 34.0 45.1 8% 33% 0%
Järfälla 23 38.3 26.3 34.6 46.4 7% 31% 2%
Sollentuna 63 38.6 23.3 33.2 43.6 9% 36% 6%
Botkyrka 27 39.1 26.2 36.6 47.1 9% 27% 3%
Nacka 82 41.0 20.0 35.6 55.7 15% 39% 9%
Täby 60 41.1 27.7 37.0 49.4 9% 26% 4%
Haninge 36 47.0 31.1 43.7 56.6 7% 20% 6%
Tyresö 38 47.7 20.4 33.8 53.8 12% 40% 12%
Upplands Väsby 14 50.2 36.9 47.0 57.7 6% 12% 9%
Salem 28 50.7 36.5 54.2 63.3 5% 16% 6%
Upplands-Bro 39 52.8 33.7 45.7 67.0 4% 15% 11%
Sigtuna 91 54.6 34.1 52.6 72.1 5% 18% 15%
Södertälje 81 59.0 27.4 51.7 71.4 11% 25% 18%
Nynäshamn 92 59.9 25.2 54.4 79.3 5% 32% 21%
Ekerö 25 60.2 39.7 58.0 77.9 3% 16% 17%
Värmdö 20 63.9 19.9 48.8 103.0 16% 32% 33%
Vaxholm 87 72.3 45.2 52.7 97.5 5% 7% 30%
Österåker 17 83.6 53.2 76.3 106.9 4% 7% 43%
Norrtälje 88 95.1 61.3 86.6 119.1 7% 11% 53%
Vallentuna 15 109.3 37.6 54.9 92.3 7% 14% 28%
13
Fig. A.1. Average yearly income, SEK (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and most of the outer suburbs.
14
Fig. A.2. Average number of transit trips per resident and day by zone. The lower figure is a zoomed map covering the core, inner suburbs and most of the outer
suburbs.
15
Fig. A.3. Average transit production cost by start zone. SEK per trip. (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and most of
the outer suburbs.
16
Fig. A.4. Average transit subsidy per resident and day by zone. SEK per trip. (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and
most of the outer suburbs.
17
Fig. A.5. Loss resulting from adopting the policy of constant subsidy rate for all trips. Average loss per resident and day by zone. SEK per trip. (10 SEK ≈ 1€). The
lower figure is a zoomed map covering the core, inner suburbs and most of the outer suburbs.
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Journal of Transport Geography 84 (2020) 102674

Contents lists available at ScienceDirect

Journal of Transport Geography

Distributional effects of public transport subsidies T

ARTICLE INFO ABSTRACT

poral cost interdependencies. We disregard such interdependencies and

To summarize the distributional profile of subsidies across income

Capital and operations cost, M€/year

Production cost per vehicle km and vehicle h

Monthly gross income (SEK)

All trips 15.4 26.6 42.9 33.9 100

All trips 34% 16% 7%

this section, we explore the distributional profiles of some alternative

5.1. Progressivity of different fare structures

Table 8 shows concentration indices for seven alternative fare

Not reported 22.2 14.0 19.9 12.6 20.4 12.9

Core 6.2 5.4 11.0 9.6 12.0 10.4

Fig. 5. Subsidy per person with three alternative fare structures.

Appendix: More tables

Stockholm 80 24.4 10.9 19.4 32.3 34% 69% 1%

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