The effects of public transit supply on the demand for automobile travel

Public transit is often advocated as a means to address traffic congestion within urban transportation networks. We estimate the effect of past public transit investment on the demand for automobile transportation by applying an instrumental variable approach that accounts for the potential endogeneity of public transit investment, and that distinguishes between the substitution effect and the equilibrium effect, to a panel dataset of 96 urban areas across the U.S. over the years 1991–2011. The results show that, owing to the countervailing effects of substitution and induced demand, the effects of increases in public transit supply on auto travel depend on the time horizon. In the short run, when accounting for the substitution effect only, we find that on average a 10% increase in transit capacity leads to a 0.7% reduction in auto travel. However, transit has no effect on auto travel in the medium run, as latent and induced demand offset the substitution effect. In the long run, when accounting for both substitution and induced demand, we find that on average a 10% increase in transit capacity is associated with a 0.4% increase in auto travel. We also find that public transit supply does not have a significant effect on auto travel when traffic congestion is below a threshold level. Additionally, we find that there is substantial heterogeneity across urban areas, with public transit having significantly different effects on auto travel demand in smaller, less densely populated regions with less-developed public transit networks than in larger, more densely populated regions with more extensive public transit networks.