THIS PAPER DERIVES COMPREHENSIVE BENEFIT-COST RULES FOR URBAN TRANSIT SUBSIDIES WHICH ENCOMPASS THE OVERALL IMPACT OF INCREASES IN SUBSIDIES ON SOCIAL WELFARE. THE RULES ALLOW BOTH FOR THE BENEFITS OF FARE OR SERVICE LEVEL CHANGES TO TRANSIT RIDERS AND FOR EXTERNAL BENEFITS IN THE FORM OF REDUCED HIGHWAY CONGESTION. THEY PERMIT ALLOWANCE TO BE MADE FOR THE DISTRIBUTIONAL IMPACTS OF THESE BENEFITS AND FOR THE WEIGHTING OF THESE BENEFITS TO DIFFERENT INCOME GROUPS WITH WEIGHTS WHICH REFLECT DECISION-MAKERS' EVALUATIONS OF THE RELATIVE BENEFITS OF UTILITY GAINS TO DIFFERENT INCOME GROUPS. THE RULES ALSO ALLOW FOR THE EFFICIENCY LOSSES FROM THE EXTRA TAXATION REQUIRED TO FUND INCREASED SUBSIDIES, AND FOR THE DISTRIBUTIONAL IMPACT OF THESE ADDITIONAL TAX BURDENS. FINALLY THEY ENABLE AN ALLOWANCE TO BE MADE FOR THE EFFECTS OF PROVISION OF FINANCIAL SUPPORT FROM HIGHER LEVELS OF GOVERNMENT TO THE LOCAL JURISDICTION ACTUALLY RESPONSIBLE FOR THE SUBSIDY DECISION.(Author/publisher).
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