Distributional welfare impacts and compensatory transit strategies under NYC congestion pricing

Early evaluations of NYC's congestion pricing program indicate overall improvements in vehicle speed and transit ridership. However, its distributional impacts remain understudied, as does the design of compensatory transit strategies to mitigate potential welfare losses. This study identifies population segments and regions most affected by congestion pricing, and evaluates how welfare losses can be compensated through transit improvements. We estimate joint mode and destination models using aggregated synthetic trips in New York and New Jersey and calibrate toll-related parameters with traffic counts reported by the MTA. The results show that the program leads to an accessibility-related welfare loss of approximately $240 million per year, which is considerably lower than the gains from toll revenues: the gross revenue estimated by our models ($1.077 billion per year) and the net revenue projected by the MTA ($450 million per year). However, these benefits gains conceal significant disparities. Welfare losses are concentrated in Upper Manhattan, Brooklyn, and Hudson County, NJ, particularly among travelers less able to shift to transit or alternative destinations. For NYC residents, compensating aggregate welfare loss requires a 0.48-minute reduction in transit wait time or a $135.59 million annual fare subsidy. Ensuring accessibility gains for all populations and counties (Pareto improving) requires a 1-2 minute reduction in wait time combined with an annual subsidy of about $100-300 million. For New Jersey residents, achieving aggregate welfare gains primarily through fare discounts (requiring $108.53 million per year) is more feasible and efficient; however, uniform discounts should be replaced by targeted mechanisms such as origin-based fare reductions or commuter pass bundles.