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

Author

Listed:
  • 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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    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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