A new look at the incidence of public transport subsidies: a case study of Santiago, Chile

Abstract

Most public transport subsidies in developing countries are justified on equity or social grounds. However, it is not clear how well current subsidies meet these objectives. In this paper we evaluate several public transport subsidies in the case of Santiago, Chile. This is an interesting case study because direct mean tested monetary transfers have been used in recent years to distribute public transport subsidies rather than use more traditional supply side sectoral subsidies. The results show that using the general welfare system to distribute transport subsidies performs much better than traditional supply side subsidies. The latter are very badly targeted and in some cases quite regressive. Together with some recent evidence from other developing country cities, the results of this paper imply that more effort needs to be placed on the analysis, design and implementation of social subsidies in the transport sector.