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Urban Economics & Finance

Six strategic decisions for

transportation in mega-cities
(by Gakenheimer, 1994)

A stable set of basic objectives concerning

urban economy, living and environment
Poverty Alleviation

Policy framework and strategy redefining the

urban challenge in LDCs
First: should move towards a broader view of urban
issues, a view that moves beyond housing and residential
infrastructure, and that emphasizes the urban
productivity of the urban economy and the need to
alleviate the constraints on productivities
Second: the productivity of the urban poor should be
enhanced by increasing demand for labor and improving
their access to infrastructure and social services
Third: More attention should be devoted to reversing the
deterioration of the urban environment
(Source: World Bank (1991). Urban Policy and Economic Development: An agenda for the
1990s, Washington D.C.: World Bank, P.3)

General strategic objectives

Guide physical development
Enhance productive economic other infrastructures,
poverty alleviation, relationships
Program and price infrastructure
Structure metropolitan governance
Each of these general strategic objectives includes
transportation facilities and services as one of its key
Complementation by supporting decisions for housing
and land development

Six strategic issues in urban transportation

How to price and finance transportation
How to choose modes
How to improve the mobility of the people
How to control automobile usage
How to protect the environment
How to create sustainable institutions

On environment and transportation policy

Two principal impacts of transportation on the
environment are:
Air pollution
Land consumption
Technology side
Limiting automobile use

Pricing & financing urban transportation

In most cities public transportation is under
Option 1: Raise P towards MC of service

In general, city should not operate a service that

it cannot self-finance
Everyone benefits from improved access; say,
through a new transit

Pricing & financing urban transportation

Subsidy: In principle Yes, but
How to levy charges on secondary beneficiaries
Tax on employers to finance on urban transportation, base
on the size of the company payroll (as done in France)

Land valorization
Benefit levies simplified forms of betterment charges in the
form of special assessment districts

Privatization: An alternative
Rationale: Public agency transit services tend to become
inefficient, decline in quality, absorb increasing government

Informal sector transportation Informal

sector transportation
Difficult to regulate
Politically aggressive
Public authority can bargain for enforcement of
regulations (service-rendering regulations?)

Central issue on the mobility of the poor

Premise: Our blunt tool of analysis that uses
simply aggregate time saved in travel as a basis
for justifying transportation investment is of very
limited value
The effort here meshes our concern for
productivity with the effort to alleviate poverty


Central issue on the mobility of the poor

Two key questions are:
Where does endowment of transportation service
improve employment possibilities, improve
education, or lower consumer prices?
What current travel behaviors of the poor show they
would benefit from better transit?

The potential pay-off from incorporating the poor

in the public transportation system is very high in
social, political and economic terms for everyone

The strategic pattern for urban policy and


Basic objectives
Poverty alleviation
General strategic objectives
Guide physical
Programme and
productive price
economic infrastructure
Transportation strategies
How to price and finance transportation How to control automobile usage
How to choose modes
How to protect the environment
How to improve the mobility of the poor How to create sustainable institutions