Study: Transit Subsidies Work Best Alone

A study by Leonardo Basso and Hugo Silva uses data from the cities of London and Santiago to gauge traffic policy effectiveness. "In new research, we provide a new assessment showing that the benefits of transit subsidization are large only when optimal congestion pricing and dedicated bus lanes are not in place or when policymakers wish to give the most help to the poorest (vertical equity)."

Taken individually, subsidies still may be the best option to improve general access. From the article: "Importantly, if instead of considering direct willingness to pay we correct for income differences because of vertical equity considerations, optimal subsidization can become the best stand-alone measure, with bus lanes and congestion pricing being less substitute measures."

The trade-off between bus lanes and subsidies depends on how much value frequent service provides. "Segregating traffic through bus lanes seems to be particularly appealing, as it achieves large welfare improvements without subsidies or cumbersome car congestion tolling, affecting bus and car travellers through quality of service (speeds) instead of monetary prices."