EFFICIENCY OF SINGAPORE TRANSPORTATION SYSTEM : AN ECONOMIC ANALYSIS

Abstract

The success of attaining robust economic growth and increased affluence is however not without any side effects. In an urban environment, the increase in demand for automoblies which resulted from a high standard of living and economic prosperity had certainly intensified the various unpleasant effects of traffic congestion. Some of the wide-ranging impacts of congestion are categorized into macro and micro-level. The former will mean that billions of otherwise productive hours are lost due to traffic jams. California, for instance , suffers about $2 million a day in lost productivity.1 Moreover, the impediment to distribution network will cause the society to lose its economic competiveness. At the micro level, not only had congestion resulted in frustrations and discomfort, the uncertainty in travel times also induced some commuters to depart earlier than they would otherwise have done. Singapore - which took a decisive step in May 1990 - adopted the direct regulation on car ownership. Since the implementation of quota system, relentless concerns has been raised with regard to issues of efficiency and equity. So far, public has found out three alleged source of culprits, namely, making COEs transferable, double transfers and the uniform-pricing auction, for causing the skyrocketing COE premiums. Thus, the interesting aspect of this paper will be the attempt to provide an economic analysis, to see whether they indeed lead to inefficient allocation. Viability of alternatives to the uniform-pricing auctions are also discussed. Lastly, long term recommendation has been made to solve the problems of traffic congestion in a land-scarce country.