The Marginal Cost of Traffic Congestion and Road Pricing: Evidence from a Natural Experiment in Beijing
2020 ◽
Vol 12
(1)
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pp. 418-453
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Keyword(s):
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. (JEL H23, O18, P25, R41, R48)