The social balance of road and rail transport in Hungary

Scientifically based correct information about the social balance of transport is indispensible for the national and local governments in order to make the right decisions concerning transport investments and pricing (taxation etc.) of transport. However, different experts often express greatly differing opinions on the content and size of the costs and benefits of transport.

This has been the case in Hungary, too, where environmental economists on the one side and the majority of transport economists on the other side often produced results which differed from each other in some cases even by several orders of magnitude.

This situation prompted the Hungarian Ministry for Economy and Transport to commission experts of the two schools of thought to commonly prepare a study bringing the two views as close as possible. The study includes the following items concerning transport:

1. Budget relations (government revenues and expenditures, and the budgets of local governments)

2. Non-budgetary subsidies (specific elements in regulations and the tax system  which distort prices

3. Environmental, health and other external costs with special attention to climate change costs

4. Positive externalities

The most discussed issues were as follows:  Which items should make part of the social balance?  Do significant positive externalities exist at all in the transport sector? a. Could the spreading effects of transport be considered as positive externalities, or they were regular effects conveyed by the market mechanism? b. Could transport value added be an expression of positive social effect, or it could not be considered as a counterpart of negative externalities?  Could CBA be used for the whole transport sector or only for separate projects? During the work it became evident that in practically all cases the views of the two sides could be reconciled. The final purpose of the work is to provide a handbook for a better evaluation of investments in transport as well as for providing a better foundation for taxation of road and rail transport.

The 82 pages study can be download here: social_balance_transport_hungary_20110131.pdf