The Effects of Reorganising the Road Grant System in Norway - a Game Theoretic Approach



The Effects of Reorganising the Road Grant System in Norway - a Game Theoretic Approach

Authors

SUNDE 0, Molde College, Norway

Description

In Norway, the responsibility for maintaining and improving the road network is shared among different authorities. Municipalities have the responsibility for what we may call community roads. These are roads primarily intended for serving the needs for c

Abstract

In Norway, the responsibility for maintaining and improving the road network is shared among different authorities. Municipalities have the responsibility for what we may call community roads. These are roads primarily intended for serving the needs for communication within the municipalities. Counties have the responsibility for what we may call county roads. These are roads primarily intended for serving the needs for communication within the counties. Finally, the central authority has the responsibility for the trunk roads. These are roads primarily intended for serving the needs for communication between different counties or regions within the country.

While it is the central authority that is reponsible for the trunk road system, this part of the road sector is organised with local road authorities in each county. Each local road authority is responsible for working out plans for maintenance of and improvements in the trunk road network within its county. These plans are reported to the Norwegian Public Roads Directorate, being the main administration, which in turn reports to the Ministry of Transport and Communications. The Ministry then prepares the plans for approval by the parliament.

While it is the local road authorities that work out the plans, the Norwegian Public Roads Directorate work out guidelines for the plans in advance. These include guidelines for the amount of money that the central authority is planning to spend on maintanance of and improvements in the trunk road network and also how this is to be distributed among the counties. In principle, it is up to the central authority to decide on how the road grants are to be distributed among the counties. In practice however, the central authority has for a long time refrained from making significant changes in each counties share of the road grants. It is recognised that this is not optimal from an efficiency point of view as is pointed out in a report from the Ministry of Transport and Communications which sayÕs that Ôas the division of the grants between the counties has remaind almost unchanged since 1970, there is reason to believe that the need for further investments differ between the countiesÕ. To deviate from the established shares however, seems to be difficult for political reasons.Ô

There are also guidelines for what kinds of projects that should be given high priority in the opinion of the central authority. A survey among the local road authorities reveals that the preferences of the central authority is taken into account when the local road authorities work out their plans. However, this is not reported to be the most important consideration. Also, even if local road authorities reports that they do pay attention to the preferences of the central authority, the survey does not reveal whether the local road authorities are loyal to the desires of central authorities or not. In any case, according to the report from the Ministry of Transport and Communications, there is a need for correcting the plans of the local road authorities as well as altering the distribution of the road grants between the counties.

In order to ensure a more efficient allocation of the road grants, the above mentioned report from the Ministry of Transport and Communications suggests that the central authority should Ôalign the local plans by making use of earmarked grantsÕ. This means that the grants are to be earmarked for specific projects in specific counties rather than distributed to the counties according to fixed shares, letting the local road authorities decide on how these should be spent. By making use of earmarked grants, the central authority is able to manage the use of the grants. The report from the Ministry of Transport and Communications does not recommend the sole use of earmarked grants however, as this interferes with the principle of local management and would be unfeasible for political reasons. It is rather suggested a procedure that compromise the use of earmarked grants and the traditional procedure as described above. The proposed procedure proceeds in two steps. In the first step, the lionÕs share of the road grants is distributed to the counties according to the fixed shares and the local road authorities work out their investment plans. In the second step, after the local road authorities have worked out their investment plans, the remaining share of the road grants is being granted to specific projects in specific counties according to the preferences of the central authority. The idea behind this compromise, is that it is better to manage the use of some of the grants rather than none of the grants.

One of the stated reasons for suggesting earmarked grants however, is a divergence in the ranking of the road projects between the central authority and the local road authorities. This indicates that the local road authoirities should be looked upon and treated as agents acting according to their own preferences. This is in accordance with the public choice view of the public sector, the economic approach to behaviour in the public sector; see Mueller (1989) for a survey. According to this view, we need to take into account how the earmarked grants affects the investments undertaken by the local road authorities in order to evaluate the effects of the earmarked grants. In this paper we argue that in this perspective, managing the use of some of the grants may be worse than managing none of the grants. Our propositions are based on a game theoretic model which will be presented in a rather informal way. We start by outlining the basic assumptions regarding the objectives and preferences of the road authorities!

Publisher

Association for European Transport