Are Public Transport Subsidies Progressive? An Empirical Analysis on the Distributive Effects of Public Transport Subsidies in Oslo and Akershus

Abstract

The goal of this thesis has been to answer the question; Are public transport subsidies progressive? With data from the Norwegian Travel Survey 13/14 we disaggregate the area of analysis to Oslo and Akershus. By dividing the sample into groups based on income, we examine the distributive effects with a three-step methodology. We study progressiveness using a descriptive, econometric and a calculative method, under the assumption that distribution of subsidies depend on public transport usage. First, the descriptive propensity approach finds the poorest group to be the most dependent on public transport. Our demand model demonstrates similar results both before and after demographic controls are included. These results pass our robustness checks. Estimated public transport use by income group is then used as an input to calculate the subsidies per group. This approach estimates that the poorest receive the most subsidies, especially when fare discounts are taken into account. Moreover, the poorest group receives on average 2 624 NOK in public transit subsidies per year, which is 38% more than the richest group. The yearly amount of subsidies received for the poorest group corresponds to 1.15% of their average income. Each method demonstrates that the poorest group is the most dependent on public transport and receives the most subsidies. In addition, the demand model suggests that the dependency is driven by factors related to income and not solely demographic characteristics in each group. Therefore, our analysis indicates that public transport subsidies in Oslo and Akershus are progressive.