The impact of fare reductions on public transportation use

Abstract

This paper empirically examines how consumers respond to reductions in public transportation fares by analyzing changes in their use of public transport. We exploit a policy that lowered fares across several municipalities in the metropolitan area of Barcelona. Our findings indicate a 39 percent increase in public transportation use during the year following the policy’s implementation. To assess whether the visibility of the policy shaped this response, we also examine the effects of the subsequent announcement of its financing scheme, nearly a year later. The announcement clarified that the fare reduction would be funded through a tax on homeowners. Once taxpayers became fully aware of both the fare reduction and its financing mechanism, their use of public transportation increased further, supporting the hypothesis that the visibility of public policies can shape individuals’ behavior regarding their use of public services. Finally, we estimate partial welfare effects, identifying both winners and losers.