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Impacts of Alternative Toll-Fee Structures on Highway Use

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Abstract

Challenges against the toll-fee system in South Korea emphasize the need for research that informs decisions regarding the conversion of toll-fee to toll-free highways. A cost-benefit analysis of reduced toll fees is performed based on a highway usage model. The model predicted traffic linked to South Korea’s Kyungbu Highway would increase by as much as 42 % if the toll fee were removed. Increased highway usage, induced by removing distance-related toll fees, is estimated to increase consumer welfare by $76 million. The increased traffic also produces negative extenalities estimated to cost $155 million, resulting in net losses of $79 million. The estimated net losses provide a critical public-welfare perspective for answering the question about whether to lower the toll fee on the Kyungbu Highway in South Korea.

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Notes

  1. The Korea Expressway Corporation is a government-owned company that constructs and manages inter-city highways and manages toll fees for the entire highway system.

  2. The Toll-road Act of 2009 was established to improve the welfare of highway users and to support the nation’s economic development. The toll fee is imposed on users of newly constructed and renovated roadways including highways, roadways used for mainly touring purposes, and roadways connecting islands.

  3. Of the four highways (i.e., Kyungbu, Kyungin, Namhae the 2nd, and Ulsan Highways) where toll-fee revenues exceed construction and maintenance costs, the Kyungbu Highway was selected for a case study because it connects the two largest cities in South Korea (Seoul and Busan) and has greater usage than the other highways. In addition, the Kyungbu Highway is viewed as pivotal in launching economic development in South Korea by shortening travel time and distance between producers and consumers, and by improving transportation logistics to facilitate exports (Park 2010).

  4. We particularly thank an anonymous referee for bringing this literature to the authors’ attention.

  5. An average exchange rate in 2009 of 1,277.42 KRW/U.S. Dollar was used.

  6. Of the 3,153 intervals, 472 intervals include zero traffic volumes in our dataset.

  7. Wooldridge (2002) and Cameron and Trivedi (1986) called this model the Negative Binomial Model II (NB II). In Stata, this model is defined as the Mean Dispersion Model (StataCorp 2013).

  8. We particularly thank an anonymous referee for bringing this issue to the authors’ attention.

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Authors and Affiliations

  1. Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, TN, USA

    Seong-Hoon Cho

  2. School of Economics and Trade, Kyungpook National University, Daegu, South Korea

    Jaimin Lee

  3. Department of Agricultural Economics, Kyungpook National University, Daegu, South Korea

    Seung Gyu Kim

  4. Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, TN, USA

    Roland K. Roberts

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  1. Seong-Hoon Cho
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  2. Jaimin Lee
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  4. Roland K. Roberts
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Correspondence to Seong-Hoon Cho.

Additional information

Views expressed are the authors’ alone and do not necessarily correspond to those of the University of Tennessee or Kyungpook National University.This work was supported by the Korea Expressway Corporation.

Appendix

Appendix

Table 7 Parameter estimates from the highway-usage price equation
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Cho, SH., Lee, J., Kim, S.G. et al. Impacts of Alternative Toll-Fee Structures on Highway Use. Appl. Spatial Analysis 8, 27–44 (2015). https://doi.org/10.1007/s12061-014-9119-x

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