Parking, transit and employment in a central business district

Abstract In this paper we present a general equilibrium model to examine the role of parking and transit subsidy policy on the size of a central business district (CBD), CBD land values, and the market shares of cars and transit. The three main features of the model are: (1) agglomeration economies increase continuously with labor market size; (2) congestion arises from auto use only; transit is noncongestible; and (3) locational equilibrium is maintained in the sense that firms and individuals cannot reduce costs or increase utility by moving, given equilibrium prices and city size. We derive the conditions under which parking taxes can be levied and used to subsidize transit and increase equilibrium CBD size and land values. We compute an optimal parking tax that maximizes CBD size and land values and derive relationships among parking taxes, transit use, and congestion. We find nonmonotonic relationships among parking taxes, land values, and transit use.

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