Urban public transportation subsidies and the Mohring effect: a literature review

Abstract

This article reviews recent literature (post-2020) on the Mohring Effect and its implications for urban public transport (PT) subsidies. The Mohring Effect posits that increased PT demand improves service quality (reducing waiting/access time), making the social marginal cost lower than the average cost, thus justifying subsidies. However, the analysis highlights challenges: substantial crowding costs counterbalance these benefits, raising optimal fares and impacting subsidy levels. Empirical evidence on the causal impact of subsidies on modal shift is mixed; subsidies may increase PT use but not necessarily reduce car use, and improvements in service quality (frequency/coverage) are crucial. Furthermore, general public transport subsidies are often ineffective for equity and income redistribution, and the "shadow cost of public funds" reduces the optimal subsidy level. The interaction with new mobilities is complex, with potential for synergy or competition. The study concludes that the Mohring Effect is fundamental, but subsidy policies must be comprehensive, considering crowding, equity, service quality, new technologies, and fiscal rigor.