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Can Tolling Help Everyone? Estimating the Aggregate and Distributional Consequences of Congestion Pricing

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  • Jonathan D Hall

Abstract

Economists have long advocated road pricing as an efficiency-enhancing solution to traffic congestion, yet it has rarely been implemented because it is thought to create losers as well as winners. In theory, a judiciously designed toll applied to a portion of the lanes of a highway can generate a Pareto improvement, even before using the toll revenue. This paper explores the practical relevance of this theoretical possibility by using survey and travel time data, combined with a structural model of traffic congestion, to estimate the joint distribution of agent preferences over three dimensions—value of time, schedule inflexibility, and desired arrival time—and evaluate the effects of adding optimal time-varying tolls. I find that adding tolls on half of the lanes of a highway yields a Pareto improvement. Further, the social welfare gains from doing so are substantial—up to $1,740 per road user per year.

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  • Jonathan D Hall, 2021. "Can Tolling Help Everyone? Estimating the Aggregate and Distributional Consequences of Congestion Pricing," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 441-474.
    • Handle: RePEc:oup:jeurec:v:19:y:2021:i:1:p:441-474.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvz082
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    Cited by:

    1. Bofinger, Peter & Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Wieland, Volker, 2018. "Vor wichtigen wirtschaftspolitischen Weichenstellungen. Jahresgutachten 2018/19 [Setting the Right Course for Economic Policy. Annual Report 2018/19]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201819, September.
    2. Jinwon Kim & Jucheol Moon & Dongyun Yang, 2024. "Pigouvian Congestion Tolls and the Welfare Gain: Estimates for California Freeways," Working Papers 2402, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    3. Boffa, Federico & Fedele, Alessandro & Iozzi, Alberto, 2023. "Congestion and incentives in the age of driverless fleets," Journal of Urban Economics, Elsevier, vol. 137(C).
    4. Russo, Antonio & Adler, Martin W. & Liberini, Federica & van Ommeren, Jos N., 2021. "Welfare losses of road congestion: Evidence from Rome," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    5. Ke Wan & Alain Kornhauser, 2023. "Market Making and Pricing of Financial Derivatives based on Road Travel Times," Papers 2305.02523, arXiv.org, revised May 2023.
    6. Agrawal, David R. & Zhao, Weihua, 2023. "Taxing Uber," Journal of Public Economics, Elsevier, vol. 221(C).
    7. Fan, Wenbo & Xiao, Feng & Nie, Yu (Macro), 2022. "Managing bottleneck congestion with tradable credits under asymmetric transaction cost," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    8. Jinwon Kim & Jucheol Moon, 2022. "Congestion Costs and Scheduling Preferences of Car Commuters in California: Estimates Using Big Data," Working Papers 2201, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    9. Ariel Goldszmidt & John A. List & Robert D. Metcalfe & Ian Muir & V. Kerry Smith & Jenny Wang, 2020. "The Value of Time in the United States: Estimates from Nationwide Natural Field Experiments," NBER Working Papers 28208, National Bureau of Economic Research, Inc.
    10. Durrmeyer, Isis & Martinez, Nicolas, 2022. "The Welfare Consequences of Urban Traffic Regulations," TSE Working Papers 22-1378, Toulouse School of Economics (TSE), revised Dec 2024.
    11. Vincent van den Berg, "undated". "Self-financing roads under coarse tolling and heterogeneous preferences," Tinbergen Institute Discussion Papers 22-045/VIII, Tinbergen Institute.
    12. Xiaojuan Yu & Vincent A.C. van den Berg & Erik T. Verhoef, 2024. "Preference heterogeneity in a dynamic flow congestion model," Tinbergen Institute Discussion Papers 24-025/VIII, Tinbergen Institute.
    13. Salgado, Edgar & Mitnik, Oscar A., 2021. "Spatial and Time Spillovers of Driving Restrictions: Causal Evidence from Limas Pico y Placa Policy," IDB Publications (Working Papers) 11818, Inter-American Development Bank.
    14. Sakai, Takara & Akamatsu, Takashi & Satsukawa, Koki, 2024. "Queue replacement principle for corridor problems with heterogeneous commuters," Transportation Research Part B: Methodological, Elsevier, vol. 187(C).
    15. Anupriya & Daniel J. Graham & Daniel Horcher & Prateek Bansal, 2021. "Revisiting the empirical fundamental relationship of traffic flow for highways using a causal econometric approach," Papers 2104.02399, arXiv.org.
    16. Jonathan D. Hall, 2024. "Inframarginal Travelers And Transportation Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1519-1550, August.
    17. Gabriel Kreindler, 2024. "Peak‐Hour Road Congestion Pricing: Experimental Evidence and Equilibrium Implications," Econometrica, Econometric Society, vol. 92(4), pages 1233-1268, July.
    18. van den Berg, Vincent A.C., 2024. "Self-financing roads under coarse tolling and preference heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 182(C).

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