Simple Model of Road Infrastructure Financing The Impact of Different Funding Schemes

This paper explores the impact of three different funding schemes on road infrastructure provision: road tolls, fuel taxes, and consumption taxes. A simple model is developed that incorporates three relevant features: fuel costs dependent on congestion, fuel efficiency, and different types of agent. The model illustrates how congestion and distributional impacts vary depending on the funding scheme. The model also shows that if fuel efficiency were fixed, fuel taxes would be a perfect substitute for road tolls, even if fuel consumption depends on congestion.