Congestion Charging and the Optimal Provision of Public Infrastructure: Theory and Evidence By

ABSTRACT: The paper provides a theoretical framework for analysing the effects of public infrastructure provision on private sector productivity using the example of a transport network. Public infrastructure such as a transport network is assumed to be a (congested) public good. When the provision of this good is at the long run equilibrium level, consumers pay a price which reflects the (individually-determined) marginal productivity of the good and the supplier is also recovering all its opportunity costs. In the traditional literature on transport congestion (Walters, 1961; Mohring and Harwitz, 1962), the concept of infrastructure capacity is often defined in term of the maximum level of traffic flow, which is more of a usage concept rather than a ‘capacity ’ concept. Congestion is then defined in terms of the difference between the marginal social cost of this traffic flow and the marginal private costs. There has been some debate in the literature on the wa