What are the Economics of Road Pricing and Congestion?

Does Traffic Congestion Reduce Employment Growth? (33 page pdf, Kent Hymely, Journal of Urban Economics, Sept. 17, 2008) 

Also discussed here: Congestion’s Impact on Urban Economies (Surface Transportation Innovations #101, Reason Foundation, March 2012) 

Today, we review a paper that examines what economic benefits result from the application of road tolls or congestion charges on commuting speed and, indirectly, on the economy as demonstrated in several different cities and through simulation modeling of travel times on highways with tolls. The conclusion is that road pricing results in much shorter travel times which vary according to the effectiveness of the pricing (e.g. 70-90% in Cambridge,UK, 30-50% in Stockholm and 14-21% in London, UK). The reduced commuting times in turn resulted in a 10-30% increase in employment growth. This economic benefit, on top of the environmental benefits of reduced pollution and health costs, needs to be considered by cities contemplating road pricing in the future.

Key Quotes:

“The effective size of an urban region’s labor market is bounded by how long it takes to make a typical journey to work. When shorter travel times increase the size of the labor market by 10%, the productivity of the metro area increased by1.3%”

“In the United States, urban vehicle-miles traveled increased 91% between 1982 and 2003…freeway lane-miles only increased 41%..a rapid increase in congestion-related travel delay.. from 16 hours per driver in 1982 to 44 hours per driver in 2003”

 “Workers generate congestion by driving to and from work during peak travel periods; at the same time, congestion discourages employment growth by raising workers' reservation wages and increasing shipping costs for goods”

 “[Cambridge, England] ..a cordon toll of 90 pence would reduce travel delay within the charge area by 70-90%... [Washington D.C.] a comprehensive toll of seven cents per mile ….would increase speeds by 12% on the Beltway, reducing delays 37% during rush hour …..[London, UK] actual speeds increased 14-21% after the city introduced a $5 cordon toll..[Stockholm].. City of Stockholm reported reductions in travel delay of 30- 50%”

 “the increases in employment growth following road pricing that reduces congestion by 50% are 10-30% higher”

Related articles

• Road Pricing in the USA (pollutionfreecities.blogspot.com)
• Intensification, Traffic Congestion and Air Pollution (pollutionfreecities.blogspot.com)
• Is Traffic Congestion the Main Cause of Car Accidents? (pollutionfree.wordpress.com)
• Government plans to introduce road tolls (money.marksandspencer.com)
• Road Pricing in the USA (pollutionfree.wordpress.com)
• Intensification, Traffic Congestion and Air Pollution (pollutionfree.wordpress.com)
• Will a tougher driving test mean less congestion? (blogs.confused.com)
• Is Traffic Congestion the Main Cause of Car Accidents? (pollutionfreecities.blogspot.com)