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Highway traffic in Britain: the effect of road capacity changes

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  • Garcia López, Miquel-Àngel
  • Gomez-Hernandez, Yadira
  • Sanchis-Guarner, Rosa

Abstract

This paper provides a theoretical framework to study the relationship between expanded road capacity, traffic volumes and increased economic activity. We build on Anas (2024) to show that increased volumes do not necessarily lead to congestion if adjustments in economic factors, such as population or employment, are not substantial. We test our predictions obtaining key estimates with data from Great Britain between 2001 and 2020 and adopting a shift-share instrumental variable approach. We find that the elasticity of vehicle kilometres travelled to road capacity improvements is positive and statistically different from 1 across different specifications, while the elasticity of population and employment is positive but smaller than 1. In our framework this implies that the cost of driving does not increase above initial levels, resulting in higher consumer surplus through changes in travel demand and time savings.

Suggested Citation

  • Garcia López, Miquel-Àngel & Gomez-Hernandez, Yadira & Sanchis-Guarner, Rosa, 2024. "Highway traffic in Britain: the effect of road capacity changes," LSE Research Online Documents on Economics 126778, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:126778
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    References listed on IDEAS

    as
    1. Gibbons, Stephen & Lyytikäinen, Teemu & Overman, Henry G. & Sanchis-Guarner, Rosa, 2019. "New road infrastructure: The effects on firms," Journal of Urban Economics, Elsevier, vol. 110(C), pages 35-50.
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    6. Hsu, Wen-Tai & Zhang, Hongliang, 2014. "The fundamental law of highway congestion revisited: Evidence from national expressways in Japan," Journal of Urban Economics, Elsevier, vol. 81(C), pages 65-76.
    7. Ioulia V Ossokina & Jos van Ommeren & Henk van Mourik, 2023. "Do highway widenings reduce congestion?," Journal of Economic Geography, Oxford University Press, vol. 23(4), pages 871-900.
    8. Miquel-Àngel Garcia-López & Ilias Pasidis & Elisabet Viladecans-Marsal, 2022. "Congestion in highways when tolls and railroads matter: evidence from European cities [The congestion relief benefit of public transit: evidence from Rome]," Journal of Economic Geography, Oxford University Press, vol. 22(5), pages 931-960.
    9. Melia, Dr Steve, 2019. "Why did UK governments cut road building in the 1990s and expand it after 2010?," Transport Policy, Elsevier, vol. 81(C), pages 242-253.
    10. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
    11. Garcia-López, Miquel-Àngel, 2019. "All roads lead to Rome … and to sprawl? Evidence from European cities," Regional Science and Urban Economics, Elsevier, vol. 79(C).
    12. Miquel-Àngel Garcia-López & Ilias Pasidis & Elisabet Viladecans-Marsal, 2022. "Erratum to: Congestion in highways when tolls and railroads matter: evidence from European cities," Journal of Economic Geography, Oxford University Press, vol. 22(5), pages 961-961.
    13. Ioulia V Ossokina & Jos van Ommeren & Henk van Mourik, 2023. "Do highway widenings reduce congestion?," Review of Finance, European Finance Association, vol. 23(4), pages 871-900.
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    More about this item

    Keywords

    transportation; road capacity; aggregate travel cost; economic activity;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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