Public Transportation Pricing and Car Use
Abstract
This paper provides novel evidence on the effects of public transportation pricing on car use and CO2 emissions. I analyze a pricing reform in the Finnish capital Helsinki that lowered public transit fares by 45 percent for individuals who ended up living in a specific, newly introduced travel zone. Using a difference-in-differences approach, I compare individuals who received the price reduction to those who lived just outside the travel zone and experienced almost no change in prices. This comparison is made possible by detailed individual-level data on vehicle mileage and ownership, as well as residential locations. I estimate the cross-price elasticity of driving to range between 0.06 and 0.27. However, I find no clear response in car ownership, either at the extensive or intensive margin. Based on a back-of-the-envelope calculation, the cost of reducing emissions with this reform landed in the range of 1000--3000 euros per tonne of CO2.