Abstract

I study the welfare and distributional effects of autonomous vehicles (AVs) using a monocentric city model with heterogeneous households and endogenous labor supply. The formulation captures the fact that AVs allow performing activities while commuting. Numerical results show that AVs increase aggregate welfare, but low-skilled households can experience losses if they are initially located further from the CBD and only high-skilled households can afford an AV. This is due to high-skilled households moving to the periphery, causing an increase in housing prices for the low-skilled, among others general-equilibrium effects. Using the revenues from a distance-based road pricing to finance a labor tax cut for the low-skilled results in gains for both skill types, but reaches only 15% of the welfare increase obtained from using the revenues to finance a general labor tax cut. This latter recycling scheme almost doubles the welfare gains from the introduction of AVs, but amplifies its uneven effects.