ARE PUBLIC TRANSPORT FARE SUBSIDIES WARRANTED IN SINGAPORE?

Abstract

Are public transport fare subsidies warranted in Singapore? Lower fares spell higher ridership which can yield operating cost savings, lower wait and access time for all commuters, and less private motoring externalities. On the other hand, higher ridership spells increased crowding levels, and if service levels are raised, higher operating costs too. By employing a slightly modified version of the Parry & Small model to sum these effects, I find that marginal welfare at current subsidy level for rail and bus during peak and off-peak to be positive, suggesting that fare subsidies are warranted. These results are highly robust to alternative model parameter specifications, and are in line with previous findings in other cities.