The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing
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Abstract
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.Citation
Yang, Jun, Avralt-Od Purevjav, and Shanjun Li. 2020. "The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing." American Economic Journal: Economic Policy, 12 (1): 418-53. DOI: 10.1257/pol.20170195Additional Materials
JEL Classification
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- P25 Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics
- R41 Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
- R48 Transportation Economics: Government Pricing and Policy
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