Fare Policy and Vertical Equity: The Trade-off between Affordability and Cost Recovery

Document Type

Journal Article

Publication Date


Subject Area

place - north america, economics - fare revenue, economics - subsidy, policy - equity, policy - fares, ridership - demand, ridership - disadvantage


transit fare policy, reduced fares, equity, low-income


Vertical equity and the maximization of farebox revenue are important but conflicting goals in the development of fare policy in the United States. Reducing fares for low-income riders reduces revenue for a transit agency, while increasing fares could disproportionately impact lower-income riders. This paper details this conflict, explores strategies that could account for both goals, and evaluates fare programs in the United States. Two types of low-income strategies are discussed: first generation strategies and targeted subsidy strategies. First generation strategies have several limitations that targeted subsidy strategies account for; first generation strategies focus more on supply, while targeted subsidy strategies focus more on demand. The evaluation of US low-income fare programs found that organizational partnerships can reduce administrative and financial impacts to agencies, local ridership characteristics need to be considered in designing a program, and that smart card technology is useful but not required to create a targeted subsidy program.


Permission to publish the abstract has been given by the Journal of Public Transportation, copyright remains with them.