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The Cost of Traffic: Evidence from the London Congestion Charge

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  • Tang, Cheng Keat

Abstract

This paper exploits the implementation of the London Congestion Charge (LCC) to provide credible estimates on the willingness to pay to avoid traffic using the housing market. This policy curtails road traffic by imposing a fee on anyone driving into the charge zone. My results show that the LCC is associated with significant improvement in traffic conditions and housing values. Instrumenting local traffic conditions with the enforcement of the LCC, and limiting the analysis to properties proximate to the charge boundary, I find that the elasticity of housing values with respect to traffic is -0.30. These findings suggest that the consequential improvement in traffic conditions due to the LCC has generated substantial windfall of more than £3.8 billion for homeowners in the zone.

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  • Tang, Cheng Keat, 2021. "The Cost of Traffic: Evidence from the London Congestion Charge," Journal of Urban Economics, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:juecon:v:121:y:2021:i:c:s0094119020300735
    DOI: 10.1016/j.jue.2020.103302
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    6. Jinwon Kim & Jucheol Moon, 2022. "Congestion Costs and Scheduling Preferences of Car Commuters in California: Estimates Using Big Data," Working Papers 2201, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    7. Stephen Gibbons & Cong Peng & Cheng Keat Tang, 2021. "Valuing the Environmental Benefits of Canals and Canal Restoration Using House Prices," Land Economics, University of Wisconsin Press, vol. 97(4), pages 858-874.
    8. Zhou, Liang & Chen, Wei & Xu, Shang, 2022. "Do rural residents care about domestic waste management? A hedonic analysis of housing prices in rural China," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322212, Agricultural and Applied Economics Association.
    9. Shr, Yau-Huo (Jimmy) & Yang, Feng-An & Chen, Yi-Syun, 2023. "The housing market impacts of bicycle-sharing systems," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    10. Austin, Wes & Carattini, Stefano & Gomez-Mahecha, John & Pesko, Michael F., 2023. "The effects of contemporaneous air pollution on COVID-19 morbidity and mortality," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    11. Qixiu Cheng & Jun Chen & Honggang Zhang & Zhiyuan Liu, 2021. "Optimal Congestion Pricing with Day-to-Day Evolutionary Flow Dynamics: A Mean–Variance Optimization Approach," Sustainability, MDPI, vol. 13(9), pages 1-15, April.
    12. Zhang, Yingheng & Li, Haojie & Ren, Gang, 2022. "Quantifying the social impacts of the London Night Tube with a double/debiased machine learning based difference-in-differences approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 163(C), pages 288-303.
    13. Lyu, Xueying, 2022. "Car restriction policies and housing markets," Journal of Development Economics, Elsevier, vol. 156(C).

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