Severe traffic congestion is ubiquitous in large urban centers. This paper provides the first causal estimate of the relationship between traffic density and speed and optimal congestion charges using real-time fine-scale traffic data in Beijing. The identification relies on plausibly exogenous variation in traffic density induced by Beijing's driving restriction policy. Optimal congestion charges range from 5 to 39 cents per km depending on time and location. Road pricing would increase traffic speed by 11 percent within the city center and lead to an annual welfare gain of ¥1.5 billion from reduced congestion and revenue of ¥10.5 billion.
Yang, Jun, Avralt-Od Purevjav, and Shanjun Li.
"The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing."
American Economic Journal: Economic Policy,
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics
Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
Transportation Economics: Government Pricing and Policy