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The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing

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  • Jun Yang
  • Avralt-Od Purevjav
  • Shanjun Li

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.

Suggested Citation

  • Jun Yang & Avralt-Od Purevjav & Shanjun Li, 2020. "The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 418-453, February.
    • Handle: RePEc:aea:aejpol:v:12:y:2020:i:1:p:418-53
    DOI: 10.1257/pol.20170195
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    Cited by:

    1. Francis Rathinam & Sayak Khatua & Zeba Siddiqui & Manya Malik & Pallavi Duggal & Samantha Watson & Xavier Vollenweider, 2021. "Using big data for evaluating development outcomes: A systematic map," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(3), September.
    2. Shihe Fu & V. Brian Viard, 2022. "A mayors perspective on tackling air pollution," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 16, pages 413-437, Edward Elgar Publishing.
    3. Mosquera, Roberto, 2024. "Stuck in traffic: Measuring congestion externalities with negative supply shocks," Regional Science and Urban Economics, Elsevier, vol. 108(C).
    4. Cong Peng, 2019. "Does e-commerce reduce traffic congestion? Evidence from Alibaba Single Day shopping event," CEP Discussion Papers dp1646, Centre for Economic Performance, LSE.
    5. Li, Tianshu & Song, Shunfeng & Yang, Yanmin, 2022. "Driving restrictions, traffic speeds and carbon emissions: Evidence from high-frequency data," China Economic Review, Elsevier, vol. 74(C).
    6. Jinwon Kim & Jucheol Moon & Dongyun Yang, 2024. "Pigouvian Congestion Tolls and the Welfare Gain: Estimates for California Freeways," Working Papers 2402, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    7. Dudhe, Naini & Benjamin, Colin, 2021. "Entanglement and quantum strategies reduce congestion costs in Pigou networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    8. Zhang, Wenjia & Liu, Chengcheng & Zhang, Hongmou, 2023. "Public acceptance of congestion pricing policies in Beijing: The roles of neighborhood built environment and air pollution perception," Transport Policy, Elsevier, vol. 143(C), pages 106-120.
    9. Gómez Gélvez, Julian & Mojica, Carlos, 2022. "Subsidios al transporte público en América Latina desde una perspectiva de eficiencia: aplicación a Bogotá, Colombia," IDB Publications (Working Papers) 12260, Inter-American Development Bank.
    10. Andrea Baranzini & Stefano Carattini & Linda Tesauro, 2021. "Designing Effective and Acceptable Road Pricing Schemes: Evidence from the Geneva Congestion Charge," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(3), pages 417-482, July.
    11. Anderson, Michael L. & Davis, Lucas W., 2020. "An empirical test of hypercongestion in highway bottlenecks," Journal of Public Economics, Elsevier, vol. 187(C).
    12. Li, Shanjun & Liu, Yanyan & Purevjav, Avralt-Od & Yang, Lin, 2019. "Does subway expansion improve air quality?," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 213-235.
    13. Linn, Joshua & McConnell, Virginia & Pesek, Sophie & Raimi, Daniel, 2023. "Transportation Taxes and Energy Transitions: Alternative Policy Designs for Funding US Road Infrastructure and Pricing Externalities," RFF Working Paper Series 23-09, Resources for the Future.
    14. Chao Sun & Jian Lu, 2022. "The Relative Roles of Socioeconomic Factors and Governance Policies in Urban Traffic Congestion: A Global Perspective," Land, MDPI, vol. 11(10), pages 1-17, September.
    15. Jerch, Rhiannon & Barwick, Panle Jia & Li, Shanjun & Wu, Jing, 2024. "The impact of road rationing on housing demand and sorting," Journal of Urban Economics, Elsevier, vol. 140(C).
    16. Russo, Antonio & Adler, Martin W. & van Ommeren, Jos N., 2022. "Dedicated bus lanes, bus speed and traffic congestion in Rome," Transportation Research Part A: Policy and Practice, Elsevier, vol. 160(C), pages 298-310.
    17. Russo, Antonio & Adler, Martin W. & Liberini, Federica & van Ommeren, Jos N., 2021. "Welfare losses of road congestion: Evidence from Rome," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    18. Wiseman, Jim & Wiseman, Thomas, 2023. "When do traffic reports make traffic better?," Economics of Transportation, Elsevier, vol. 36(C).
    19. Selod,Harris & Soumahoro,Souleymane, 2020. "Big Data in Transportation : An Economics Perspective," Policy Research Working Paper Series 9308, The World Bank.
    20. Peng, Cong, 2019. "Does e-commerce reduce traffic congestion? Evidence from Alibaba Single Day shopping event," LSE Research Online Documents on Economics 103411, London School of Economics and Political Science, LSE Library.
    21. 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).
    22. Kim, Jinwon, 2022. "Does roadwork improve road speed? Evidence from urban freeways in California," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    23. Chakrabarti, Sandip, 2022. "Passively wait for gridlock, or proactively invest in service? Strategies to promote car-to-transit switches among aspirational urbanites in rapidly developing contexts," Transport Policy, Elsevier, vol. 115(C), pages 251-261.
    24. Herzog, Ian, 2024. "Microgeographic speed, reliability, and traffic externalities," Economics of Transportation, Elsevier, vol. 39(C).

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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