Journal of Transport Geography 84 (2020) 102674

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Journal of Transport Geography

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Distributional effects of public transport subsidies T

a,⁎ b c
Maria Börjesson , Jonas Eliasson , Isak Rubensson
a
VTI Swedish National Road and Transport Research Institute, Sweden and KTH Royal Institute of Technology, Sweden
b
Linköping University, Sweden
c
Stockholm Public Transport Administration and KTH Royal Institute of Technology, Sweden

ARTICLE INFO ABSTRACT

Keywords: We analyze the distribution of transit subsidies across population groups in Stockholm. We develop a novel
Public transport methodology that takes into account that the subsidy per passenger varies across transit links, since production
Subsidies costs and load factors vary. With this, we calculate the subsidy per trip in the transit network and analyze the
Equity distribution of subsidies across population groups. The average subsidy rate in Stockholm is 44%, but the var-
Progressive
iation across trips turns out to be large: while 34% of the trips are not subsidized at all but generates a profit,
Distribution effect
Concentration index
16% of the trips have a subsidy rate higher than 2/3. We calculate the concentration index to explore the
distribution of subsidies across income groups. The average subsidy per person is similar for all income groups,
except for the top income quintile. This holds not only for the current flat-fare system, but also for distance-based
fares and fares with a constant subsidy rate. Transit subsidies is hence not effective as a redistribution policy in
Stockholm. The largest systematic variation we find is across residential areas: the average subsidy per person is
five times higher in the peripheral areas of the region compared to the regional core, and the subsidy per trip is
ten times higher.

1. Introduction
Governments spend vast sums on transit subsidies. There are several
arguments for subsidizing transit for reasons of economic efficiency,
such as scale economies and second-best pricing of road traffic ex-
ternalities. In addition to such arguments, transit subsidies are often
motivated using equity arguments. It is often argued in the policy de-
bate that since transit is used more by low income groups, transit
subsidies have a progressive distributional profile. Still, there is little
research on the incidence of transit subsidies in real-world transit sys-
tems underpinning this conclusion. In this study, we develop and apply
a method for empirical analysis of the distribution of transit subsidies.
To do this, we calculate the real subsidy of each individual service by
subtracting paid fares from the production cost for each service, and
then calculate how these service-level subsidies accrue to different so-
cioeconomic groups by taking into account how different groups use the
different services in the transit system. We also compare results for
several alternative fare schemes.
Most previous studies of equity effects of public transit have either
explored the distributional profile of paid fares, or of the benefits
generated by transit services, rather than the incidence of the actual
service-level subsidies. Basso and Silva (2014) explore the distribu-
tional impacts of optimal transit subsidies compared to the baseline, in
terms of consumer surplus. They find that low-income groups gain from
optimal transport subsidies compared to the baseline. Mayeres and
Proost (2001) analyze distributional effects of transit subsidies using
inequality aversion factors. Since low income groups consume more
transit (number of trips) on average, they find that transit subsidies
benefit low income groups proportionally more. Gómez-Lobo (2009)
analyze the distribution of benefits from transit use and paid fares. They
find that the welfare system is a more efficient way of supporting low
income groups. Serebrisky et al. (2009) analyze how benefits and costs
of transit use are distributed across income groups in Santiago, finding
that subsidies provided to users are more progressive than subsidies to
operators. Börjesson et al. (2019) find that optimal transit supply
benefit low income groups proportionally more in a small city than in a
large.
The perspective of the present paper differs from the ones above in
that our starting point is the subsidy to each individual service. Services
with high occupancy levels need lower subsidies (or even generate
profits), while services with low occupancy need higher subsidies. This
might well mean that high-income people residing in single-family
houses with lower densities receive higher subsidies than average.
Hence, merely noting that low-income groups make more transit trips
per person does not necessarily imply that more actual subsidies accrue
more to them; they may well to a larger extent use services which do

⁎
Corresponding author.
E-mail address: maria.borjesson@vti.se (M. Börjesson).

https://doi.org/10.1016/j.jtrangeo.2020.102674
Received 11 May 2019; Received in revised form 18 February 2020; Accepted 18 February 2020
0966-6923/ © 2020 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/BY-NC-ND/4.0/).
M. Börjesson, et al.
not need so much subsidies.
The lack of previous analyses of the incidence of the transit sub-
sidies can be contrasted with a vast literature on distributional effects of
congestion pricing systems for which the redistribution of resources is
the main focus (e.g. Eliasson and Mattsson, 2006; Kristoffersson et al.,
2017; Maruyama and Sumalee, 2007; Ramjerdi, 2006; Safirova et al.,
2004; Santos and Rojey, 2004; West and Börjesson, 2020). The same
holds for distributional effects of fuel taxes (Bento et al., 2009; Bureau,
2011; Eliasson et al., 2018; Santos and Catchesides, 2005; Sterner,
2012a, 2012b). One reason for this is probably that it is more difficult
to objectively calculate the subsidy per transit trip than the tax/charge
per trip, as will be discussed in Chapter 2.
The production cost per passenger will vary among income groups
depending on the spatial and temporal distribution of trips by different
income groups (which depend on where high- and low-income groups
live) and their trip frequencies (determining occupancy levels). It will
also depend on the spatial and temporal distribution of the transit
supply. Therefore, the distribution of transit subsidies will be the result
of different conflicting forces so that only a numerical exercise of a real
case study can show the distribution of subsidies. A main contribution
of this paper is to develop a methodology for empirically computing the
actual distribution of subsidies across different groups and individuals,
which is different from the distribution of transit supply, fare structure
or trip frequencies. We will also show how different fare structures
affect this distribution.
Also, the studies analysing distributional profiles of fare structures
typically neglect production costs per trip. Some of these studies have
found that distance-based transit fares would hurt low-income groups
more than high-income groups because the former are located in re-
mote areas (Sanchez and Brenman, 2007). Other studies have found the
opposite (Bandegani and Akbarzadeh, 2016; Farber et al., 2014).
Cervero (1981a, 1981b) and Bates and Anderson (1982) find that flat
fares imply a moderately regressive system because short and off-peak
trips (relatively more frequent among low-income travellers) are cross-
subsidizing long trips and peak trips (relatively more frequent among
high-income travellers). The conflicting outcomes of these analyses
depend to a large extent on where high- and low-income groups live, in
the city center or in the suburbs, and this differs among cities.
Another branch of the literature focuses solely on the distribution of
the transit supply, measured by indicators such as the number or fre-
quency of lines or bus/train stops within walking distance, among
different groups (Cao et al., 2018; Delbosc and Currie, 2011; Kramer
and Goldstein, 2015; Lubitow et al., 2017; Ruiz et al., 2017). El-Geneidy
et al. (2016) also take fares into account in the measure of transit ac-
cessibility. There are also studies focusing specifically on transit ac-
cessibility of low-income or otherwise socially disadvantaged groups
(Adorno et al., 2018; Deakin, 2007; El-Geneidy et al., 2016; Garrett and
Taylor, 1999; Lubitow et al., 2017; Murray and Davis, 2001). Some
even consider transit access as a right (Hamburg et al., 1995; Roy and
Caywood, 2018).
Hence, what the previous equity literature has not accounted for,
which is a key contribution of the present paper, is that the cost of a
providing a given level of transit access requires different amounts of
resources. Iseki (2016) is an exception, taking into account the dis-
tribution of funding via a land tax when calculating the distribution of
costs and benefits among 9 townships in Ohio. However, this analysis
does not take fares into account and is on an aggregate townships level,
which precludes an analysis of the distribution of subsidies among in-
dividuals. Iseki (2016) finds that the subsidies are progressive because
low-income people reside in the centre where transit coverage is
naturally the highest compared to the funding of the system. In con-
trast, in a review of 12 studies, Iseki and Taylor (2002) find that transit
subsidies are often regressive because high income people travel longer
distances, travel more in peak periods and use more capital-intensive
2
Journal of Transport Geography 84 (2020) 102674
modes, all increasing operation costs. However, the results would pre-
sumably have been reversed had more low-income peopled resided
further away from the centre.
There is an extensive literature on socially optimal pricing and
supply of transit services. This literature considers factors such as
economies of scale and density, crowding and second-best pricing of
road traffic externalities (Basso and Silva, 2014; Fielbaum et al., 2016;
Gschwender et al., 2016; Jansson, 1980; Jansson et al., 2015; Jara-Díaz
et al., 2016, 2017b, 2017a; Mohring, 1972; Parry and Small, 2009). A
general conclusion from this literature is that fares should be differ-
entiated in space and time to take variation in positive and negative
externalities into account. Still, there are, as noted, few studies ex-
ploring how the fare structure design impacts the distribution of the
subsides across groups, which is a second purpose of this study.
In order to compare subsidies and fare structures, we need a mea-
sure of their distributional profile across income groups. We will use the
concentration index (Kakwani, 1977) to measure how public spending
on subsidies is distributed across income groups. The index is bounded
between −1 and 1. If all citizens receive the same amount, the index
will be zero. A progressive spending profile (more is spent on low in-
come groups) yields a negative concentration index, and vice versa. The
index can be compared across time and countries. It has previously
been used to measure for instance to what extent subsidies and public
spending in the health sector are distributed across income groups (van
Doorslaer et al., 2006; O'Donnell et al., 2007). To our knowledge, this is
the first application of it in the transport economics literature.
2. Methodology
2.1. Calculating the subsidy per trip
The subsidy of a transit trip is the difference between its production
cost and its fare. The production cost of a transit trip can be defined in
several different ways. In short, we define the production cost of a trip
with a certain transit service by dividing the total production cost of the
service with the total number of passenger kilometres with the service,
and then multiplying the thus obtained cost per passenger kilometre
with the length of the trip. A door-to-door transit trip may consist of
several parts with different services.
Note that it is crucial to take into account the occupancy rates of
different services when calculating the subsidy per trip, and that this
may lead to unexpected results. Imagine two residential areas served by
identical transit services with the same fare. One area is occupied by
low-income residents, and the other by high-income residents. If the
low-income residents make more transit trips per person, the load factor
on their transit service will be higher, and hence require less subsidies
(if any). In this example, the rich group will effectively receive more
transit subsidies per person, and transit subsidies will hence have a
regressive distributional profile – even though the poor make more
transit trips per person!
Note also that we are not trying to calculate welfare-optimal sub-
sidies, but merely calculate how actual subsidies accrue to different
groups. In the example above, it would be welfare-improving to spend a
higher subsidy on the bus with lower occupancy (reflecting low mar-
ginal cost), even if the average subsidy per passenger is already high.
But even if the marginal production cost of the trip on the bus with low
occupancy rate is low, the bus still requires a subsidy that must be paid
by public money. In other words, the aim of the analysis is to compute
how much of the tax-payers money that accrues to different groups of
public transport users (as opposed to those not using the public trans-
port system). This has implications also for the calculation of the pro-
duction cost, namely that we use the average cost per transit trip, not
the marginal costs.
When calculating the total production cost of each transit service,
M. Börjesson, et al.
we therefore do not only include costs that vary with total vehicle-
kilometres or vehicle-hours, but also include fixed system costs such as
capital and maintenance costs for vehicles, stations and tracks. Such
costs are allocated to services in proportion to vehicle kilometres and
vehicle hours.
We acknowledge, however, that when breaking down the produc-
tion cost of the transit trips in this way, we disregard two factors. First,
operators are producing several products signified by spatial and tem-
poral cost interdependencies. We disregard such interdependencies and
assume that the production costs of each service are independent,
which may bias the results. Second, fixed costs can be assigned to dif-
ferent services in several different ways. Although we argue that the
most reasonable way is to assign fixed costs proportional to the vehicle
kilometres and as vehicle hours because longer trips use the facilities
more, other principles are possible. One could for instance divide the
fixed costs between travellers in proportion to the number of transit
trips they make. Yet another possibility is to divide fixed costs equally
among all transit users (an entry subsidy for all individuals making at
least one transit trip). The principle we use implies that we assign a
proportionally larger production cost to long trips, and to individuals
making many transit trips, compared to the other principles suggested
above.
On the other hand, the way we split the total production cost of
services across trips will tend to underestimate the production cost per
trips on peripheral links of a given service, since they tend to have
lower load factors. As explained above, we split the total cost for a
service proportionally across all passenger kilometres on the service.
Another possible definition of the cost of a transit trip would be to take
into account that the occupancy rate of a service varies, and define the
cost per trip such that trips made in high-occupancy conditions have
lower production costs, since more passengers share the same vehicle.
Our definition presumes that services have to be served in their entirety
and cannot be split into shorter sub-services. If that assumption holds, it
is logical that all passenger kilometres share the total production costs
of the service equally. If this would not be the case, our assumptions
will tend to underestimate the subsidy rates on peripheral links, since
they tend to have lower load factors, and vice versa for central links.
We calculate the production cost of a trip from i to j as the sum of
the production cost of all links k used during the trip. A link k is the
connection between two adjacent nodes (stations or bus/tram stops)
with a particular service (such as a bus line). Note that if two different
bus services run between the same two stops, these are treated as dif-
ferent links in the analysis. A service R is a service consisting of a set of
links. A service can be of any mode.
To describe the calculation method formally, let Tijtr be the yearly
number of transit trips from i to j in time period t = 1, 2, 3 (peak, off-
peak, weekend) using route r, and pijtn the fare for this ij-trip (equal for
all routes) for individual n (allowing for individual-specific fares, since
there may be discounts for e.g. students and retirees) in time period t.
Let dk be the length of transit link k. Let δijrk be 1 if link k is part of the
route r from i to j with the lowest generalized cost in the transit network
and 0 otherwise. Each link belongs to exactly one service R, such that
the service R includes a set of links in the network. Let R(k) be the
service that link k belongs to.
We assume independent capacity production in each line section of
the network, such that all costs for the transit system can be attributed
to production costs per vehicle kilometre or vehicle hour, θm(R) and ηm
(R), respectively, for the mode m used for service R. Let DRt and HRt be
the total yearly vehicle kilometres and vehicle hours, respectively, used
to produce service R in time period t. Let m(R), where m∈ {bus, tram,
metro, commuter train}, be the transport mode used to carry out a
given service R. The yearly production cost of the service R in period t is
then calculated as CRt = θm(R)DRt + ηm(R)HRt.
Given this, we get.
3
Journal of Transport Geography 84 (2020) 102674
Yearly number of trips on link k in period t
k
Tkt = ijr Tijtr ijr
Average production cost of a single trip on link k in period t c = C
kt R (k ) t
dk
k Tkt dk
Production cost of a single ij-trip in period t cijt =
1 k
Tijt kr Tijtr ijr ckt
Subsidy for an ij-trip for individual n in period t pijtn − cijt
Average subsidy accruing to a member of group N (with |N| n n
n N ijt Tijt (pijt cijt )
members)
|N|
Hence, we calculate the production cost of one trip on a link by
allocating the total production cost of the service equally across all
passenger kilometres on the corresponding service (within a time
period). This means that we assume that the production cost per pas-
C
senger kilometre R (k ) t is equal on all links k on service R within time
k Tkt dk
period t. As discussed above another possible way would be to assume
that the production cost per person kilometre differs between links on
C
the same service depending on the load factor of the link k, R (k ) t . This
Tkt k dk
would mean that links with higher load factors would get a lower
production cost per trip, compared to other links belonging to the same
service, since more passengers would share the production cost.
Moreover, we have divided the production cost among time periods
according to produced vehicle kilometres and hours by time period, DRt
and HRt. One could argue that a larger part of the cost than the number
of vehicle kilometres should be assigned to the peak, because the
overall number of vehicles is set to meet the peak supply. On the other
hand, the cost of staff is higher in off-peak1 and weekend periods be-
cause of supplementary pay outside regular working hours, so we as-
sume that these cancel out.
2.2. Calculating operation costs
We get trip volumes Tijr, route-link incidences δijrk and link lengths dk
from the output of the transport model VISUM.2 Hence, we use the
transport model to determine which links that are used by different routes
for trips from i to j. The transport model simulates the choice of route by
assuming that users choose the route with the lowest generalized cost in
the transit network. However, all passengers do not choose the same route
because they are as assumed to arrive at the stops randomly according to a
uniform distribution. Depending on the arrival time at the bus stop, the
shortest average travel time varies among routes depending on the time-
tables. Therefore, the transport model simulates the number of passengers
selecting each possible route from i and j, Tijr.
The output from the transport model also includes the total yearly
production of vehicle kilometres and vehicle hours for all services, by
mode and time period. Tijr are broken down to time periods t by ap-
plying the shares of the total demand by time period. The demand-to-
supply ratio is very similar across time periods (Table 1). The peak
period has 44% of the supply and also 44% of the demand. This means
that the average subsidy per trip equals the peak trip subsidy. The off-
peak period has five percentage points higher demand than supply, and
the weekend period the other way around. Hence, off-peak trips receive
a slightly smaller subsidy than the average weekly trip and weekend
trips receive a slightly higher subsidy. However, these differences are
small and the split of trips between off-peak and weekend trip do not
vary between income groups.3 Hence, we neglect this difference,
1
The off-peak includes also late nights and very early mornings.
2
The transport model VISUM uses an origin-destination matrix from the
national Swedish transport model SAMPERS, calibrated against observed pas-
senger volumes, boardings and alightings.
3
If the sample is split in two income groups, high and low, according to
Table 3, high income people do a larger share of their trips in the peak.
However, comparing only off-peak and weekend trips, the split is virtually
identical: 70% of these trips are made in the off-peak and 30% are made during
the weekend according to the travel survey.
M. Börjesson, et al.
Table 1
Time period factors by for demand and supply.
Share of total Share of total weekly
weekly demand supply
Peak (7 am–9 am, 3 m-6 pm) t = 1 44% 44%
Off peak (6 pm-7 am, 9 am-3 pm) 33% 39%
t=2
Weekend t = 3 23% 17%
Tot 100% 100%
implying that the subsidy of different time periods equals the average
weekly subsidy. This means essentially that the timing of the trip has no
impact on the subsidy.
The variables pijtn are taken from data from the Stockholm Public
Transport Administration (but the fare does not vary across time per-
iods) and Tijn are taken from travel surveys, see further Section 3.
We now proceed by explaining the calculation of production costs
per vehicle kilometre and vehicle hours, θm and ηm. These costs of
course vary by mode, but not across services by the same transport
mode. They are calculated from detailed cost data acquired from the
Stockholm Public Transport Administration, responsible for transit
provision in the County.
The total production cost of the transit system is 16.3 BSEK/year. Of
this 6.8 BSEK/year are covered by subsidies, 3.1 BSEK/year by revenues
from property rents and advertisements, and 6.4 BSEK/year by ticket
revenues (resulting in the subsidy rate4 6.8/16.3 = 42%). The total
cost, 16.3 BSEK/year, can be split into a direct production cost of the
transit services, 13.1 BSEK/year, and “other costs” 3.2 BSEK/year. Both
the “direct production cost” and the “other cost” include fixed costs that
should in theory be included in our production cost. However, we
disregard the “other costs” (−3.2 BSEK/year) and the revenues from
property rents and advertisements (3.1 BSEK/year) simply because they
cannot be broken down to services or even to modes with the in-
formation that we have access to. We will base the calculation of the
costs and the revenues generated per trip on the production cost of the
services (13.1 BSEK/year) and the ticket revenues (6.4 BSEK/year)
only, resulting in a subsidy rate of 52% (1–6.4/13.1).
We have the direct production cost of the transit services (13.1
BSEK/year) separated into four modes, see Table 2. It includes the
variable cost of staff, operations and maintenance costs by mode. Some
of these are proportional to vehicle kilometres (such as vehicle main-
tenance) or vehicle hours (such as driver costs). Also fixed cost are
included, such as capital costs for vehicles (γm1) and stations (γm2) and
maintenance and operation costs the metro and tram tracks (γm3). Cost
for the railway infrastructure (which is maintained by the national
government) or roads used by buses (which are maintained by the
municipalities) are however not included. Overhead costs by mode
(γm4) and cost items common to all modes (γm5) are divided among on
the modes in proportion to the use of them (according to the Public
Transport administration).
As discussed in Section 2.1 we argue that it is reasonable to break
down the fixed cost γ (for vehicles, stations, tracks and overhead costs)
to services according to the produced vehicle kilometres and vehicle
hours with the argument that the longer trips, the more tracks, station
and vehicles are used (see further discussion in the paragraph further
down in this section). The fixed costs (γmi) are therefore allocated
proportionally to vehicle hours and vehicle kilometres, and added to
the variable kilometre cost (αm) and variable hourly cost (βm)
4
The ratio between the subsidy from the regional government and the total
costs of the system, excluding investments in physical infrastructure and op-
eration and maintenance cost for the infrastructure for bus and commuter
trains. These costs are covered by the municipalities and the national govern-
ment, respectively, and are therefore not included.
4
Journal of Transport Geography 84 (2020) 102674
m
i
i m
m = m +
m + m t R m
DRt
i
m i m
m = m +
m + m t R m
HRt
2.3. Comparing distributional profiles of public spending
To summarize the distributional profile of subsidies across income
groups, we will use the concentration index (CI) (Kakwani, 1977). The
CI is based on the concentration curve s(x), which shows the share of
total spending accruing to the poorest x percent of the population. The
CI measures the total difference between the actual spending profile
and lump-sum spending:
CI = 2
1
(x s (x )) dx = 1 2
1
s (x ) dx.
0 0
The CI is bounded to the interval (−1,1). A lump-sum spending,
where all individuals get the same amount, means that s(x) = x and
that CI equals zero. If a disproportionate share of spending accrues to
the poor, the CI is negative, and the spending profile is defined as
progressive. Conversely, if a disproportionate share of spending accrues
to the rich, the CI is positive, and the spending profile is defined as
regressive.
The CI can be compared across scenarios, points in time, cities and
countries. It has been widely used in health economics to calculate the
progressivity of healthcare subsidies and spending. To our knowledge,
it has not been applied to analyze public spending in the transport
sector before.
The CI can be compared to the Suits index and the Gini index. The
Suits index (Suits, 1977) is used to measure the distributional profile of
taxes; transport-related applications can be found in West (2004), CPPP
(2007) and Eliasson et al. (2018). The Suits index is bounded to the
interval (−1,1) just as the CI, but they differ in that the Suits index
defines a neutral tax as one where everyone pays the same share of their
income, while the CI defines a neutral spending scheme as one where
everyone gets the same amount in absolute terms. The Gini index
measures wealth distribution, and is bounded to the interval (0,1).
Perfect equality, where everyone has the same wealth, gives a Gini
index of 0.
3. Data
3.1. Stockholm
The total population of the Stockholm County was 2.2 million in
2015. The population growth has increased in recent decades, from
around 1% per year before 2000 to over 1.5% after 2000. The county
consists of 26 municipalities, where the City of Stockholm is by far the
largest with nearly half the county's population. For purposes of pre-
sentation, we have divided the municipalities into five groups ac-
cording to proximity to the city centre, taking not just distance but also
transport opportunities into account. The categorization is shown in
Fig. 1: the core includes Stockholm, Solna and Sundbyberg; the inner
suburbs include Lidingö, Sollentuna, Huddinge, Danderyd, Nacka and
Järfälla; the outer suburbs include Botkyrka, Haninge, Tyresö, Täby; the
peripheral suburbs include Upplands Väsby, Salem, Södertälje, Ekerö,
Upplands Bro; the periphery include Nykvarn, Sigtuna, Nynäshamn,
Värmdö, Vaxholm, Östertälje, Österåker, Norrtälje and Vallentuna. The
core corresponds roughly to the area served by the metro network, and
contains nearly half of the county's population.
The average income in the core is close to the regional average
(Table 2), while it is higher in the inner suburbs. The outer suburbs are
characterised by high-density housing surrounding commuter train
stations, where the average income is low, and more sparsely populated
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Table 2
Transit production costs.
Bus Tram Metro Commuter train

Capital and operations cost, M€/year

Total costs proportional to vehicle kilometres αm 110 9 20 28
Total costs proportional to vehicle hours βm 277 22 48 33
Capital cost γm1 136 31 162 87
Stations γm2 0 5 71 47
Tracks operations/maintenance, γm3 0 14 14 0
Overhead γm4 47 7 28 18
Cost common for all modes γm5 46 7 28 17
Total production per year
Total supply of vehicle kilometres per year and mode, Mh/year ( t R m DRt ) 4.71 0.13 0.31 0.13
Total supply of vehicle hours per year and mode, Mkm/year ( t R m HRt ) 119.68 4.05 10.14 7.19

Production cost per vehicle km and vehicle h

Vehicle cost per hour, €/h (θm) 94 527 857 973
Vehicle cost per km, €/km (ηm) 1.5 6.7 11 15
Average cost per passenger km, €/km/pass. 0.32 0.26 0.15 0.11
Average cost per seat km, €/km/seat 0.097 0.084 0.065 0.031

Fig. 1. Stockholm County, with categorization of municipalities. Background data ©2017 Google.

areas with single family houses and higher average incomes. The per-
iphery is dominated by single family housing, and the income increases
again.
Transit trips make up 31% of all trips in the county (47% of mo-
torized trips), but this varies widely in the county. The transit share is
highest for trips to and from the inner city, where it reaches 80% for
work trips.
Trip counts show that the number of transit boardings has been
increasing at the same rate as the population, and faster than the
number of car trips to and from the regional centre. Since the 1950s,
Stockholm has followed a transit-oriented planning strategy (Cervero,
1995; Stockholm City Planning Administration, 2009), meaning that
land use is concentrated around stations and along transit corridors.
This in an important explanatory factor of the high transit share com-
pared to many other cities.
In the inner city the number of car trips has declined since 2005.
One of the main reasons is that Stockholm introduced congestion
charges in 2006, designed as a toll cordon around the inner city
(Eliasson, 2008). This reduced traffic across the cordon persistently by
around 20% (compared to pre-2006 levels) during weekdays, and
traffic levels has remained approximately constant ever since. The peak
charge was increased and an additional charging point was added in
2016, which reduced traffic across the cordon even further (Börjesson
and Kristoffersson, 2018). Congestion charges, fuel taxes and parking
charges together internalize much of the external effects from driving.
Hence, subsidizing as a second-best pricing of road traffic externalities
is much less justified in Stockholm than in most other comparable cities
(Börjesson et al., 2017, 2018).
3.2. The travel survey
The basis for calculating distributional effects is a large cross-sec-
tional travel survey, representative for trips and citizens in Stockholm
County. Using a travel survey is preferable to breaking down data from
a transport model by population group, since all correlations between
socioeconomic characteristics and travel patterns are accurately re-
presented, provided of course that the sample is representative and
large enough.
The travel survey was conducted among Stockholm County re-
sidents September–October 2015. The respondents were a random
sample of Stockholm County residents aged 16–84, who were asked to
report all trips made during a randomly assigned survey day. The

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M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Table 3
Population and trip characteristics.
# ind. sample % ind. Sample # transit trips/ # trips/ Average trip length all Average trip length Average income per household
ind. ind. trips transit trips SEK/m

Monthly gross income (SEK)

≤ 10,000 3677 8% 0.59 1.29 14.00 14.67 7741
> 10,000 & ≤ 20,000 5090 11% 0.88 2.51 16.29 17.49 15,152
> 20,000 & ≤ 30,000 5810 13% 0.85 2.61 16.40 18.21 22,833
> 30,000 & ≤ 40,000 10,727 24% 0.81 2.90 15.78 17.74 32,566
> 40,000 & ≤ 60,000 7410 16% 0.72 2.67 16.03 17.92 47,458
> 60,000 & ≤ 80,000 3691 8% 0.43 1.70 14.85 16.16 67,720
> 80,000 3749 8% 0.36 1.46 16.17 16.21 127,079
Not reported 5311 12% 0.63 1.80 17.20 17.81 –
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482

Occupation
Employed 28,748 63% 0.74 2.59 15.89 17.81 43,622
Student 5069 11% 1.26 2.22 16.18 18.23 38,529
Retired 7971 18% 0.34 1.58 18.54 15.14 39,663
Other 3679 8% 0.79 1.82 15.24 16.81 30,257
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482

Age
16–24 y 6212 14% 1.13 2.13 16.47 17.62 44,921
25–39 y 12,999 29% 0.84 2.57 14.21 16.78 34,097
40–64 y 18,359 40% 0.61 2.48 16.67 18.72 45,866
65–84 y 7897 17% 0.36 1.63 18.54 15.14 41,667
Total 45,467 100% 0.70 2.31 15.99 17.51 41,482

Gender
Women 22,774 50% 0.82 2.36 14.71 17.25 39,984
Man 22,693 50% 0.59 2.25 17.39 17.89 42,944
Total 45,467 100% 0.70 2.31 16.0 17.51 41,482

Residential area
Core 21,723 48% 0.87 2.39 12.7 13.4 41,232
Inner suburbs 8365 18% 0.65 2.37 15.6 17.5 46,420
Outer suburbs 5791 13% 0.58 2.15 17.9 22.2 40,730
Peripheral suburbs 4164 9% 0.46 2.13 21.5 28.4 36,802
Periphery 5425 12% 0.42 2.16 26.2 37.3 39,254
Total 45,467 100% 0.70 2.31 16.0 17.51 41,482

respondents could choose between a mail-back paper survey and a web-
based survey. The final sample was weighted to be representative for
the county population with respect to age, gender and residential lo-
cation. The sample of individuals responding to the survey matches the
census statistics with respect to employment and driving licence shares.
The survey days are uniformly distributed among all days of the week
(workdays and weekends). The response rate was 35%, and the final
sample included 45,467 respondents making 102,588 trips, of which
31,961 were transit trips.
3.3. Population and trip characteristics
Table 3 shows population characteristics based on the travel survey.
The respondents report household income in 11 categories, family
status, gender, age, occupation: employed, student, retired, others
(unemployed, sick leave or parental leave). We approximate the income
per individual by dividing the mid-point of the household income in-
terval reported by the respondents by the number of adults in the
household. Note that for many of the students and the young adults
(16–24 years old) the computation of the individual income from the
household income is misleading or unreliable because many of them
live with their parents. The students' monthly income will also vary
with the season (i.e. they might have a larger monthly income during
the summer if they are working then) which also makes the meaning of
the monthly income difficult to interpret.
The number of transit trips is highest for the mid-income groups,
although the difference between income groups is small (note that daily
trip frequencies in the table refer to all days, not just weekdays). The
mid-income groups also make slightly longer trips, both with transit
and in general. Students make considerably more transit trips than
other groups. On average, women make shorter transit trips than men,
but slightly longer trips with other modes (although the latter differ-
ence is small). The largest differences in travel patterns can be seen
between residents in different areas. Residents in the more central areas
make slightly more trips overall, many more transit trips, and con-
siderably shorter trips.
Figs. A.1 and A.2 show how the average income and average transit
trip frequency, respectively, varies in the region. The incomes tend to
be highest in the core and inner suburbs, particularly north of the core.
The transit trip frequency tends to be highest in the core and along the
commuting train and metro corridors.
4. Distributions of subsidies
This section describes the distributional profile of subsidies given
the current fare structure, while the next section (Section 5) compares
this to alternative fare structures. The current fare structure is described
in 4.1 and the distribution of the trip production costs is described in
4.2. Based on the fare and the trip production cost, the subsidy per trip
for all reported trips in the travel survey is computed. Section 4.3 shows
how the subsidy per person and per trip is distributed across population
groups using descriptive statistics. Since the current fare is hardly

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M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Table 4
Distribution of trip production costs (SEK/trip), by population group.
1st quartile Median 3rd quartile Mean Share of
trips

All trips 15.4 26.6 42.9 33.9 100

Income groups
Low income (< 40 15.5 26.5 42.9 33.8 68%
kSEK/month)
High income (≥ 40 14.8 25.2 41.1 32.6 32%
kSEK/month)
Occupation
Work 15.7 26.5 43.3 34.2 69%
Student 16.8 28.2 42.9 35.0 19%
Retired 12.3 24.3 42.0 31.8 7%
Others 11.3 20.7 38.0 28.5 4%
Main mode
Bus −7.7 3.8 23.6 14.0 22%
Metro −5.3 4.3 18.3 10.0 51%
Commuting train/ 5.2 18.8 34.0 25.0 27%
tram
Residential area
Core 12.3 21.1 33.3 25.4 62% Fig. 2. Cumulative distribution of subsidies per trip.
Inner suburbs 21.5 31.6 45.7 36.4 17%
Outer suburbs 26.4 38.1 51.6 43.3 9%
Peripheral suburbs 33.4 49.6 68.3 54.9 5%
Periphery 34.3 59.5 98.0 76.9 7% trip. The distribution is skewed: while the median production cost per
Type of house trip is just under 27 SEK, the mean is 34 SEK, the 75-percentile is nearly
Single-family house 22.2 35.2 52.7 44.0 24%
Multi-family house 13.9 24.0 39.2 30.6 76%
43 SEK, and the tail of the distribution stretches far beyond 100 SEK per
trip. At the same time, there are also many cheap trips: almost 25% of
trips have production costs below 15 SEK.
Table 4 shows production costs per trip for two income groups (low
and high). We restrict the presentation to two income groups because,
differentiated across trips, the current distributional profile of transit remarkably, production costs per trip vary very little by income group.
subsidies is almost entirely driven by three factors: differences in pro- High-income groups make slightly longer trips on average, but this is
duction cost per trip, differences in transit trip frequencies, and fare counteracted by low-income groups using more services with low load
discounts for retired and students. factors. Together, the below-average income group has a slightly higher
production cost per trip than the highest income group. Because the
4.1. Fare structure fare is flat, the distribution of the production cost is just a parallel shift
of the distribution of the subsidy per trip, plotted in Fig. 2 to Fig. 4.
As in many cities, fares in Stockholm have a low degree of differ- Students have the highest average production costs, followed by
entiation. The only substantial differentiation is the discount for stu- workers, since these two groups make longer transit trips. The differ-
dents and retired. To some extent, travel cards also introduce a differ- ence between occupation groups is relatively small, however.
entiation between occasional and habitual transit users. But apart from The subsequent rows of Table 4 show how the production costs vary
that, fares are uniform across distance, time of day, area and transport with the main mode of the trip. Trips with main mode metro have the
mode. lowest average production costs, but trips with main mode bus have the
Fares are paid either with single-trip tickets or with travel cards lowest median production costs. Production costs vary more for bus
which allow unlimited travel during a week, month or year. Travel trips than for metro trips (the difference between the 1st and the 3rd
cards are more common than single-trip tickets: 82% of all trips are quartile is larger for the former), due to larger variation in the load
paid for by travel cards. Fares are discounted for students and retired, factors.
who pay 38% less. The price for single-trip tickets vary depending on Track-based trips (with trams and commuting trains), are the most
type of payment (e.g. cash is more expensive than prepaid cards); the expensive to produce, with a median production cost approximately
average single-trip full fare is 28 SEK (10 SEK ≈ 1€). Holders of travel four times higher than the other modes. This is due to the longer
cards make 40 trips per month on average (this does not vary among average trip distances with these modes. On the other hand, commuter
population groups), which implies an average fare per trip for travel trains have the lowest average cost per passenger-kilometre and seat-
card holders of 20 SEK (without discount). Taking single-trip tickets kilometre of all modes (see Table 2).
and travel cards together, the average fare for a non-discounted trip is The segmentation that really matters is by residential area (Table 4).
22 SEK. Taking discounts into account, the average fare for all types of There are huge and consistent differences in trip production costs de-
passengers and payments is 19 SEK. pending on where in the county passengers live: the further away from
the centre, the higher is the production cost per trip. Fig. A.3 shows a
4.2. Distribution of trip production costs map of the average production cost per trip by origin zone. The table
shows that the trip production costs in the periphery are almost three
This section presents differences in production cost per trip across times higher than in the core. This pattern is confirmed by the map. The
several population groups. The subsequent section presents subsidy per differences are mostly due to passengers in more peripheral areas
trip and per person by subtracting fares from production costs and making longer transit trips. Moreover, average load factors in periph-
taking transit trip frequencies into account. eral areas are also slightly lower, but this difference is rather small:
Table 4 presents mean and quantiles of production costs per transit production cost per kilometre is just 8% lower in the core compared to

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M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Table 5 Table 6
Distribution of trip production costs (SEK/trip), by residential are and type of Subsidies by population group.
house.
% of Average Average # transit Average
Residential area 1st quartile Median 3rd quartile Mean Shar of trips population production subsidy trips per subsidy
cost per trip per trip person per person
Single-family house
Core 18.3 29.1 41.2 12.2 6% Income (SEK/month)
Inner suburbs 21.3 30.7 44.8 17.4 8% ≤ 10,000 8% 33.8 18.5 0.6 10.9
Outer suburbs 26.4 38.3 53.0 43.8 4% > 10,000 & 11% 31.4 13.8 0.9 12.2
Peripheral suburbs 32.8 49.8 70.9 55.4 2% ≤20,000
Periphery 33.0 58.4 102.5 75.7 4% > 20,000 & 13% 34.5 15.1 0.9 12.9
Total 3.6 17.4 34.3 25.5 24% ≤30,000
> 30,000 & 24% 34.5 14.4 0.8 11.7
Multi-family house
≤40,000
Core 11.9 20.4 31.9 5.5 55%
> 40,000 & 16% 33.7 13.8 0.7 10.0
Inner suburbs 21.7 32.4 46.3 17.9 10%
≤60,000
Outer suburbs 26.3 37.7 50.7 42.8 5%
> 60,000 & 8% 30.7 11.0 0.4 4.7
Peripheral suburbs 34.4 49.2 66.3 54.4 3%
≤80,000
Periphery 37.3 60.8 92.1 78.4 3%
> 80,000 8% 30.5 10.9 0.4 4.0
Total −5.6 5.1 20.7 11.4 76%
Not reported 12% 38.8 22.2 0.6 14.0
Total 100% 33.9 14.9 0.7 10.5

Occupation
Employed 63% 34.2 13.2 0.7 9.8
the periphery. (Note that the core encompasses a rather large area, Student 11% 35.0 22.1 1.3 27.7
Retired 18% 31.8 17.0 0.3 5.7
much larger than e.g. the inner city; it coincides roughly with the extent
Other 8% 28.5 6.5 0.8 3.0
of the metro network.) Total 100% 33.9 14.9 0.7 10.5
Note however, that if we had chosen to allocate the fixed cost for
Age
vehicles, stations and tracks according to number of trips or some other 16–24 y 14% 35.5 21.2 1.1 23.9
rule, and not according to the produced vehicle kilometres and vehicle 25–39 y 29% 31.5 11.1 0.8 9.3
hours, the production cost for long trips would be proportionally 40–64 y 40% 36.0 14.5 0.6 8.9
smaller. Still, all reasonable rules used to assign the fixed cost would 65–84 y 17% 31.2 16.4 0.4 5.9
Total 100% 33.9 14.9 0.7 10.5
imply that the production cost would be substantially higher for long
trips. Gender
Women 50% 33.5 14.6 0.8 11.9
Now, high income people often reside in single-family houses with
Man 50% 34.4 15.3 0.6 9.0
lower densities, often implying lower occupancy rates. The final two Total 100% 33.9 14.9 0.7 10.5
rows of Table 4 indicate how production costs differ between passen-
Residential area
gers living in different types of houses.5 They indicate that trips made Core 48% 25.4 6.2 0.9 5.4
by passengers living in single-family houses have an average production Inner suburbs 18% 36.4 17.7 0.7 11.6
cost of more than twice the production cost of trips made by passengers Outer suburbs 13% 43.3 24.6 0.6 14.4
living in multi-family houses. However, Table 5 shows the same sta- Peripheral 9% 54.9 36.7 0.5 17.0
suburbs
tistics, controlling for residential area. It shows that when controlling
Periphery 12% 76.9 57.9 0.4 24.4
for residential area, the differences between type of house vanishes Total 100% 33.9 14.9 0.7 10.5
outside the core. Among trips made by residents of the core – making up
62% of the trips – the difference remains: trips made by residents in the
core cost on average more than twice as much to produce as the trips
made by residents in multi-family houses. This difference is related to
density. Links with low occupancy rates requires higher subsidies. This varies substantially across residential areas. The third column shows
shows than not only distances, but also densities are important to take average subsidy per trip.6 For the purposes of this study, it is convenient
into account when analysing the distribution of subsidies between dif- that the only variation in Stockholm fares is the discount for students
ferent groups. and retired. This makes results easy to interpret: it means that the
variation in average subsidies per trip essentially only depends on the
variation in production costs and whether the passenger is a student/
4.3. Distribution of subsidies retired or not. The fourth column shows average transit trip frequencies
per group, which results in the last column, average subsidy per person
The subsidy per trip is computed as the production cost minus the by group.
fare. Table 6 shows how subsidies are distributed across population The first part of Table 6 shows subsidies per income group. The
groups. The last column shows subsidy per person by group. Table 6 subsidies turn out to be mildly progressive; the concentration index (see
shows how the distribution of subsidy per person depends on how three Section 2.3 and Section 5.1) is −0.217. This is mainly due to lower
factors vary: production costs per trip, transit trip frequencies, and transit trip frequencies in the top income quintile (over 60,000 SEK/
fares. The second column of Table 6 includes the production costs per month), while differences in the rest of the income range are small. In
trip. As shown in the previous section, production cost per trip is similar
across income groups and gender, varies slightly with occupation, and
6
Note that the average subsidy rate for trips in the sample is 44% (14.9/33.9)
5
In the travel survey, there is no variable for house type, but there is one according to Table 4. This differ from the total subsidy rate on the aggregate
variable asking the respondent “do you have your own driveway by your level which is 52%, calculated from the production costs (13.1 BSEK/year) and
house”. Since most single-family houses, and only such house, have their own ticket revenues (6.4 BSEK/year), see Section 3.1. The lower subsidy rate per trip
driveway, this is a good proxy for single-family house. This variable matches in our sample is partly due to sampling error, but also because children (who
well with the share of single-family houses in each of the residential areas of the pay low ticket price or are free of charge and therefore have a high rate of
county (see Table 4). subsidies) are not included in the sample.

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M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

income groups below the top quintile, the transit trip frequency lies
around 0.8 trips per person and day, but in the highest quintile it drops
to around half of that. Production costs per trip are also slightly lower
in the highest income ranges. This is because high-income groups are
overrepresented in central areas, which means that their average trip
length is shorter and that they travel on services with high load factors,
implying lower production costs per trip.
In the rest of the income range, trip frequencies and production
costs are broadly similar. Overall, this leads to subsidies per person less
than half for the top income quintile compared to the rest of the income
range. For the rest of the income groups, subsidies per trip and per
person are similar. The bottom income group – with a high share of
students and retired – receives a considerably higher subsidy per trip
(due to discounts), but on the other hand makes fewer trips, resulting in
a subsidy per person on par with the other low and middle-income
groups.
Turning to occupation, the variation is larger. Students are the big
winners, getting nearly three times more subsidies per person than
employed persons. This is partly because students make more transit
trips than any other group, and partly because of the student discount.
Fig. 3. Cumulative distribution of subsidies per trip by income group.
The higher transit trip frequency explains a little more than half of the Blue = high incomes, red = blue incomes. (For interpretation of the references
difference in subsidies per person between students and employed, and to colour in this figure legend, the reader is referred to the web version of this
the student discount a little less than half. Retired and others (un- article.)
employed, sick leave or parental leave) receive less subsidies – a half
and a third, respectively, of what the employed get. This is partly be-
cause they make fewer transit trips, but also because the average pro-
duction cost is lower and the average fare higher (despite the discount the huge geographic differences. For example, residents in the per-
for retired), since fewer of them use travel cards. iphery get almost five times more subsidies per person than residents in
As to age groups, results are as expected, given the findings for the core. Differences are substantial also when comparing residents in
students and retired persons: young people get the most subsidies, be- the inner suburbs to residents in the core: the former get more than
cause of the student discount and their high trip frequency, while old twice as much subsidies. The map in Fig. A.4 shows how the average
people get the least subsidies despite the retiree discount, since their subsidy per resident and day varies on an even more detailed geo-
average fare is higher and they make fewer trips. Young adults graphical level. It confirms that the average resident in the inner city
(25–39 years) have lower production costs per trip but make more generates a profit, whereas other residents in the core receives a small
transit trips than older adults (40–64 years). A likely explanation is that subsidy. Looking at subsidies per trip, differences are even bigger: for
the older group to a larger extent live in single-family houses and hence example, the subsidy per trip is nearly ten times higher for residents in
further from the centre. Since these effects counteract each other, the periphery than for residents in the core.
however, subsidies per person are similar for the two groups. Women Again, the rule of allocating the fixed cost for vehicles, stations and
get an appreciably higher subsidy per person than men (around 30% tracks in proportion to produced vehicle kilometres and vehicle hours is
more), because they make more transit trips per person. not the only possibility. Other possible rules would imply that the
However, all differences discussed above are small in comparison to production cost, and therefore the subsidy, for long trips (or for

Table 7
Share of trips with high and low subsidies.
Share of trips with production cost lower Share of trips with production cost more than Share of trips with fare more than three times
than the fare (negative subsidy) three times higher than the fare higher than the production cost

All trips 34% 16% 7%

Income groups
Low income (≤20 kSEK/ 34% 15% 6%
month)
High income (≥ 40 kSEK/ 38% 13% 9%
month)
Occupation
Employed 37% 11% 7%
Student 18% 32% 3%
Retired 30% 21% 7%
Other 55% 6% 13%
Residential area
Core 45% 8% 9%
Inner suburbs 20% 17% 3%
Outer suburbs 14% 23% 2%
Peripheral suburbs 10% 42% 3%
Periphery 13% 53% 3%

9
M. Börjesson, et al.
Fig. 4. Cumulative distribution of subsidy per trip by residential area.
Black = core, red = inner suburbs, blue = outer suburbs, green = peripheral
suburbs, pink = periphery. (For interpretation of the references to colour in this
figure legend, the reader is referred to the web version of this article.)
individuals making many transit trips) would be relatively smaller.
The results in Table 6 only shows average subsidies per group, but
now we turn to the distribution of subsidies in the full sample and
within the groups. Fig. 2 and Table 7 show that the distribution of
subsidies exhibits a large variability. The first column of the table shows
the share of trips that are not subsidized (hence yields a financial sur-
plus), since production costs are lower than the fare. The second
column shows the share of trips with a higher subsidy rate than 2/3.
The third column shows the share of trips generating a profit higher
than 2/3 of production cost. Table 7 shows that 34% of trips are not
subsidized, while 16% have a subsidy rate higher than 2/3 and 7% of
the trips generate a profit higher than 2/3.
Broadly speaking, Table 7 shows the same differences across groups
as the results in Table 6. Differences across income groups are small
(see Fig. 3). A majority of the trips of others (including unemployed and
people on sick leave or on parental leave) yield a surplus to the op-
erator, and 13% of their trips generates a profit higher 2/3 of the dis-
tribution cost. However, only 18% of the students' trips generates a
surplus. Geographic differences are again substantial (see also Fig. 4). A
majority of the trips made by the residents of the periphery have a
subsidy rate higher than 2/3.
5. Alternative fare structures
The previous section presents results for a current fare structure –
essentially a flat-fare system with discounts for retired and students. In
Table 8
Concentration indices for seven alternative fare structures.
Fare structure Concentration index
Base (flat fare with student+retired discount) −0.217
Base without student+retired discount −0.187
10% reduced base fare −0.209
Zero fares −0.177
No travel cards, only single-trip fares −0.214
Same subsidy rate for all trips −0.205
Distance-based fare −0.203
10
Journal of Transport Geography 84 (2020) 102674
this section, we explore the distributional profiles of some alternative
fare structures. Section 5.1 focuses on how the fare structure impacts
the progressivity of the transit subsidies. As discussed in Section 2.3, the
progressivity of public spending (in our case subsidies) across income
groups can be defined and computed by the concentration index. The
index lies in the interval (−1,1). A negative index means that the
spending profile is progressive (poorer groups get a larger share of total
spending) and vice versa.
Section 5.2 focuses on how the alternative fare structures impact the
distribution of the transit subsidies across residential areas. To avoid
getting lost in detail, we will not present results in other dimensions
than income and residential area.
5.1. Progressivity of different fare structures
Table 8 shows concentration indices for seven alternative fare
structures. They are computed under the assumption that the travel
behaviour says unaffected by the changes in fare structure. As long as
the changes in the fares are reasonably small, this assumption should be
appropriate. However, the assumption can be questioned for large
changes in fares, such as assuming zero fares.
The first row of Table 8 (“Base”) shows that for the current fare
structure in Stockholm, subsidies are mildly progressive. As shown in
the previous section, this is partly due to the fare discount for students.
It is also due to the lower transit trip frequency for the top income
quintile. The former effect is illustrated in the second row, showing that
the concentration index increases to −0.187 (i.e. less progressive) if the
fare discount for students and retired is removed.
Reducing fares is often advocated as a policy with positive dis-
tributional effects. However, the third and fourth rows show that this is
not true in Stockholm. Reducing fares by 10%, or all the way down to
zero, implies less progressive subsidies, because this effectively reduces
or takes away the discounts for the students and the retired. However,
reduced fares would not necessarily be less progressive in a city where
there the transit trip frequency differed more between income groups.
Then, the reduced fares would benefit the low-income groups relatively
more than high income groups than what is the case in Stockholm.
From an efficiency point of view, it is obvious that social gains can
be made by moving from flat fares to differentiating fares in various
dimensions to account for variations in e.g. crowding, production costs
and externalities. Moreover, moving from travel cards allowing un-
limited trips to single-trip fares would also allow fares to more accu-
rately reflect the marginal cost (i.e. the social cost) of the trip, resulting
in social efficiency gains.
However, more differentiated fares are often resisted with the ar-
gument that this would have regressive distributional effects. The last
three rows show that this argument is not valid in Stockholm: the
concentration indices remain virtually unchanged. The three fare
structures analyzed in the three rows are constructed such that the
aggregate fare revenues are equal to the base case (assuming no
changes in travel behaviour).
In the “No travel cards” fare structure, travel cards are abolished,
and all trips are paid for with a single-trip fare, chosen such that the
total revenues remain unchanged but such that the students and retired
still pay 38% less. This would in itself increase the social efficiency of
system, but more importantly it makes it easier to introduce other kinds
of fare differentiation, such as peak/off-peak differentiation or distance
differentiation. As it turns out, there are no appreciable impacts on the
distributional effects across income groups (or any other population
groups) of abolishing travel cards and replacing them with a revenue-
neutral single-trip fare. One reason for this is that the share of travellers
with travel cards and the transit trip frequencies are so similar across
income groups. Moreover, many retirees and others (unemployed, sick
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Table 9
Distribution of subsidies across income groups for three alternative fare structures (same aggregate revenue).
Monthly gross income (SEK) BASE Same subsidy rate for all trips Distance-based fare

Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person

Not reported 22.2 14.0 19.9 12.6 20.4 12.9

≤ 10,000 18.4 10.9 18.6 10.9 20.0 11.8
> 10,000 & ≤ 20,000 13.8 12.2 14.7 13.0 14.7 13.0
> 20,000 & ≤ 30,000 15.1 12.8 14.6 12.5 14.2 12.1
> 30,000 & ≤ 40,000 14.4 11.7 14.0 11.4 13.5 10.9
> 40,000 & ≤ 60,000 13.8 9.9 14.1 10.2 14.5 10.4
> 60,000 & ≤ 80,000 11.0 4.7 12.7 5.5 13.0 5.6
> 80,000 10.8 4.0 12.9 4.7 13.8 5.0
Total 14.9 10.5 14.9 10.5 14.9 10.5

leave or parental leave) make so few transit trips per month that they
cannot benefit from the travel card deal.
The next row shows the concentration index of a fare where all trips
get the same subsidy rate (again chosen such that the total revenues
remain unchanged). This is of course not necessarily an efficient fare,
but it might be a fairer structure. Interestingly, this structure has vir-
tually the same distributional profile as the base structure; the con-
centration index changes marginally. The subsidy per trip and per
person by income group for this fare structure is presented in Table 9.
The subsidy per trip and per person is slightly higher than in the base
structure for the bottom and the top income quintile, but the effect is
small. We can conclude that moving from a fare structure where sub-
sidy rates vary widely to one where they are uniform does not change
the distributional profile of subsidies appreciably – and hence, dis-
tributional concerns are not an argument against increased spatial
differentiation of fares.
The same conclusion is reached when analysing the last fare struc-
ture, where fares are proportional to trip distance (still revenue neu-
tral). Again, the centration index and the distribution of subsidies
across income groups remain virtually unchanged, which can be seen in
the last row of Table 8 and the leftmost columns of Table 9.
5.2. Distribution of subsidies across residential areas
The two fare structures constant subsidy rate and distance-based
fares result in a similar spatial distribution of the subsidies, contrasting
that of the base structure. Distance-based fares imply similar subsidies
per trip and per person in all residential areas. Moreover, constant
subsidy rate implies similar subsidies for all residential areas, but re-
sidents of the periphery still get slightly higher subsidies than the core.
Fig. A.5 confirms the results of Fig. 5 but shows and even larger
spatial variation of gains and losses of the constant subsidy rate fare
structure in all areas. Note also that Fig. A.2 indicates the spatial pat-
tern of the gains and losses of a uniform 10% fare reduction or zero
fares, since these are proportional to the spatial variation of the number
of transit trips per person and day.
The focus of this paper is not to design fares that optimize social
efficiency, considering road traffic externalities, crowding, and econo-
mies of scale and density etc. Our focus is to analyze the distributional
profiles of subsidies and we have found that the periphery gets many
times higher subsidies. A relevant question, however, is whether there
are arguments that might potentially justify from an efficiency point of
view the current subsidy structure with its extreme differences between
the core and the periphery. Since this is not the focus of the paper, we
constrict ourselves to listing a number of potentially relevant arguments
and leave exploration of their validity for future research.
It turns out that there are arguments both in favour of and against
having higher subsidies in peripheral areas:

In Section 4.3 we show that subsidies vary hugely by residential
area given the current flat fare. Residents in the periphery get subsidies
per person and per trip which are several times larger than residents in
inner areas. Changing from the initial flat fare to a constant subsidy
rate, or to a distance-based fare, has considerable spatial distributional
effects, despite the marginal effect on progressivity. Results are shown
in Table 10 and Fig. 5. Fig. A.5 shows a map of the gains and losses per
resident and day of changing to fares resulting in the same subsidy rate
for all trips.
- Crowding and capacity constraints are higher in the core, at least in
the peak, implying a higher marginal user cost there. This supports
having lower subsidies in the central areas.
- Economies of density, i.e. the Mohring effect (Mohring, 1972), are
presumably lower in the core due to higher frequencies. This also
supports having lower subsidies in the central areas.
- On the other hand, road traffic externalities are higher in central
areas in Sweden (Swedish CBA Guidelines, 2018). Even if they are to

Table 10
Distribution of subsidies across residential areas for three alternative fare structures (same aggregate revenue).
Residential area BASE Same subsidy rate for all trips Distance-based fare

Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person Subsidy per trip Subsidy per person

Core 6.2 5.4 11.0 9.6 12.0 10.4

Inner suburbs 17.7 11.6 16.1 10.6 16.9 11.0
Outer suburbs 24.6 14.4 19.1 11.2 16.4 9.6
Peripheral suburbs 36.7 17.0 25.4 11.8 21.4 9.9
Periphery 57.9 24.4 33.2 14.0 29.2 12.3
Total 14.9 10.5 14.9 10.5 14.9 10.5

11
M. Börjesson, et al.
Fig. 5. Subsidy per person with three alternative fare structures.
large extent internalized through congestion charges and parking
charges they might not be fully internalized even in Stockholm, and
therefore this tends to support having higher subsidies in central
areas. In cities without congestion charges this argument would be
stronger.
- Higher subsidy rates for trips from the periphery to the regional
centre, where most jobs are concentrated, might be a way to com-
pensate for income-tax wedges on the labour market. This would
tend to improve matching by decreasing access costs between
workers and jobs.
- Having higher subsidy rates for residents in peripheral zones can be
a way to reduce the differences in attractivity across residential
zones, making centrally located housing more affordable and per-
ipheral locations more attractive for residents and eventually con-
structors. In fact, most transit investments in Stockholm historically
have been motivated by opening up new areas for housing con-
struction. The population in the Stockholm region has been growing
rapidly over years and is still growing, and there is a substantial
shortage of housing, especially cheap housing. Since the cost for
housing construction for logistical reasons increases the denser the
area is, trying to make ever more remote parts of the region at-
tractive for housing construction by subsidizing transport can in
principle be a sensible policy. However, this urban development has
also contributed to suburban transit-oriented sprawl (Cervero,
1995), which is supported by the higher transit subsidies to re-
sidents in the periphery. This highlights the downsides of the cur-
rent fare system essentially promoting urban sprawl.
As pointed out above, we cannot say to what extent any of these
arguments are valid arguments for the high subsidy rates in peripheral
zones; exploring that would require separate studies. However, our
understanding of Swedish transport policy is that they all (valid or not)
are considered to some extent when setting transit fares.
6. Conclusions
Governments spend vast sums on transit subsidies, often based on
the argument that it is an effective income redistribution policy in-
strument. Conventional wisdom seems to be that spending money on
transit subsidies is a progressive policy, since it is assumed that most of
the money go to low-income groups. Moreover, suggestions to differ-
entiate transit fares – which has a considerable potential to increase the
12
Journal of Transport Geography 84 (2020) 102674
social efficiency of the transit system – is often dismissed with the ar-
gument that this would hurt low income groups. However, few studies
before this one has explored the redistribution effects taking into ac-
count the variation in subsidies across links and trips in the network,
and how this would change with increasing differentiation of the transit
fares. Our results of course pertain to Stockholm, so our specific con-
clusions cannot be extrapolated to other cities without caveats.
However, the purpose of the present paper is also to present a metho-
dology and framework that can then be applied in other contexts, and
results can then be compared.
A key methodical issue has been to break down the transit system's
production cost to average production cost per trip. When breaking
down the costs to trips we have made two simplifications which impact
the results. First, for simplicity we disregard that operators are produ-
cing several products with spatially and temporally cost inter-
dependencies. Second, some cost can reasonably be assumed to be
variable and proportional to the vehicle kilometres (such as vehicle
maintenance) or vehicle hours (such as driver costs) of the service.
There are also some fixed costs for vehicles, stations and tracks. There
is, however, no objective way method of assigning the fixed costs for
vehicles, stations and tracks to different services. Although we argue
that the most reasonable way is to assign the fixed cost proportional to
the passenger kilometres and passenger hours because longer trips used
these services more, other rules are possible. Our choice of rule implies
that that we assign a proportionally larger production cost, and thereby
subsidy, to long trips compared to most other possible rules. On the
other hand, the way we split the production cost across trips (by allo-
cating the total production cost of the service equally across all pas-
senger kilometres on the corresponding service) will tend to under-
estimate the production cost on peripheral links, since they tend to have
lower load factors, and thereby overestimate the subsidies of more
central and short trips.
Our analyses of transit subsidies in Stockholm show that transit
subsidies are mildly progressive, to a large extent due to discounts for
students and retired, but also because the citizens in the top income
quintile make fewer transit trips per person. Still, the progressivity is
weak because a wide range of income groups get roughly equal sub-
sidies. As a policy for redistribution among income groups, hence,
subsidizing transit is not an effective policy. Moreover, changing the
fare structure from the current flat-fare system to differentiated fares
(proportional to trip distance or constant subsidization rate) does not
impact the progressivity of the subsidies. Hence, concerns about
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

regressive distributional effects is hardly a valid argument against dif-
ferentiating transit fares. Moreover, we find that travel cards do in fact
not benefit low-income groups.
Students and retirees enjoy discounted fares in Stockholm, and this
has an appreciable progressive effect: without these discounts, the
concentration index would change from −0.22 to −0.18. Students get
by far the highest subsidy per person, partly because of the discount,
and partly because they make many and long trips. Retirees and others
(unemployed, sick leave or parental leave), however, get the lowest
subsidy per person of all occupancy groups despite the subsidy, partly
because they make few transit trips, and partly because fewer of them
have travelcards and hence pay a higher average fare.
By far the largest distributional effect is between residential areas.
The difference in subsidies per person and per trip between residential
areas is huge. For example, residents in the periphery get almost five
times more subsidies per person as residents in the core. Even com-
paring adjacent areas, differences are substantial: for example, residents
in the inner suburbs get more than twice as much as residents in the
core. And within the core, the subsides varies between residents in
multi-family houses and single-family houses: the average production
cost of trips for the latter passengers are higher due to lower densities.
Differences get even bigger for subsidies per trip: the subsidy per trip is
nearly ten times higher for residents in the periphery than for residents
in the core. This again underscores that the distributional profile of
transit subsidies depends on the fare schemes and on where high- and
low-income groups live, in the city or suburbs. This is probably a main
determinant of the distribution of transit subsidies in the city.
Differentiating the fares by making them proportional to trip dis-
tance or setting a constant subsidy rate for all trips would of course
imply a more uniform spatial distribution of the subsidies. These two
fare structures yield subsidies per person and per trip that are broadly
similar across residential areas, although the outermost areas still get
slightly higher subsidies.
This begs the question if there is a logical reason why current sub-
sidies increase so much with the distance from the regional core. The
pattern is very consistent and is just not about the periphery: subsidies
increase quickly and monotonically all the way from the regional centre
outwards, so even the difference between the core and the inner sub-
urbs is substantial. Political economy reasons seem unlikely, since re-
sidents in the core make up a majority of voters in the county, so a
proposal to differentiate fares proportional to trip distance, for ex-
ample, would get a majority of voters behind it (assuming they are
voting according to self-interest).
There may be good reasons for this subsidy structure, for example
increasing the amount of affordable and attractive housing, or im-
proving matching on the labour market, but exploring whether these
are valid arguments is out of the scope of this paper. On the other hand,
the current subsidy structure clearly conflicts with another common
argument, namely that transit subsidies are justified as a second-best
pricing of road traffic externalities, since these largest in central areas.
It is also conceivable that voters and decision makers are not quite
aware of the actual distribution of subsidies across income groups or
residential areas. Analyses like the one presented in the present paper
can then hopefully inform the debate.
Author contribution statement
All authors have contributed in all parts of the analysis.
Acknowledgements
The VTI author acknowledges the financial support by VINNOVA
and K2 Sweden's national centre for research and education on public
transport.

Appendix: More tables

Municip. Index Mean 1st q. Median 3rd q. Pay more than twice actual cost Pay more than actual cost Pay less than 1/3 of actual cost

Stockholm 80 24.4 10.9 19.4 32.3 34% 69% 1%

Solna 84 25.6 13.2 20.2 30.1 28% 71% 2%
Sundbyberg 83 26.1 15.6 23.9 33.2 19% 65% 0%
Nykvarn 40 28.2 7.5 15.1 30.3 47% 69% 6%
Lidingö 86 30.2 18.8 26.0 36.6 11% 57% 2%
Huddinge 26 32.7 20.9 29.5 41.7 9% 46% 1%
Danderyd 62 34.7 24.0 34.0 45.1 8% 33% 0%
Järfälla 23 38.3 26.3 34.6 46.4 7% 31% 2%
Sollentuna 63 38.6 23.3 33.2 43.6 9% 36% 6%
Botkyrka 27 39.1 26.2 36.6 47.1 9% 27% 3%
Nacka 82 41.0 20.0 35.6 55.7 15% 39% 9%
Täby 60 41.1 27.7 37.0 49.4 9% 26% 4%
Haninge 36 47.0 31.1 43.7 56.6 7% 20% 6%
Tyresö 38 47.7 20.4 33.8 53.8 12% 40% 12%
Upplands Väsby 14 50.2 36.9 47.0 57.7 6% 12% 9%
Salem 28 50.7 36.5 54.2 63.3 5% 16% 6%
Upplands-Bro 39 52.8 33.7 45.7 67.0 4% 15% 11%
Sigtuna 91 54.6 34.1 52.6 72.1 5% 18% 15%
Södertälje 81 59.0 27.4 51.7 71.4 11% 25% 18%
Nynäshamn 92 59.9 25.2 54.4 79.3 5% 32% 21%
Ekerö 25 60.2 39.7 58.0 77.9 3% 16% 17%
Värmdö 20 63.9 19.9 48.8 103.0 16% 32% 33%
Vaxholm 87 72.3 45.2 52.7 97.5 5% 7% 30%
Österåker 17 83.6 53.2 76.3 106.9 4% 7% 43%
Norrtälje 88 95.1 61.3 86.6 119.1 7% 11% 53%
Vallentuna 15 109.3 37.6 54.9 92.3 7% 14% 28%

13
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Fig. A.1. Average yearly income, SEK (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and most of the outer suburbs.

14
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Fig. A.2. Average number of transit trips per resident and day by zone. The lower figure is a zoomed map covering the core, inner suburbs and most of the outer
suburbs.

15
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Fig. A.3. Average transit production cost by start zone. SEK per trip. (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and most of
the outer suburbs.

16
M. Börjesson, et al. Journal of Transport Geography 84 (2020) 102674

Fig. A.4. Average transit subsidy per resident and day by zone. SEK per trip. (10 SEK ≈ 1€). The lower figure is a zoomed map covering the core, inner suburbs and
most of the outer suburbs.

17
M. Börjesson, et al.
Fig. A.5. Loss resulting from adopting the policy of constant subsidy rate for all trips. Average loss per resident and day by zone. SEK per trip. (10 SEK ≈ 1€). The
lower figure is a zoomed map covering the core, inner suburbs and most of the outer suburbs.
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