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Pigouvian Congestion Tolls and the Welfare Gain: Estimates for California Freeways

Author

Listed:
  • Jinwon Kim

    (Department of Economics, Sogang University, Seoul, Korea)

  • Jucheol Moon

    (Department of Computer Engineering & Computer Science, California State University, Long Beach)

  • Dongyun Yang

    (Department of Economics, The University of Texas, Austin)

Abstract

This paper quanti_es the optimal Pigouvian congestion tolls imposed on California freeway users and the associated welfare gains by estimating the technological supply relationship of roads and the time-cost elasticity of demand using novel identi_cation strategies and big data. Based on our estimates, we suggest that the optimal congestion tolls are around 10-16 cents per vehicle mile under moderate congestion and 25-114 cents under severe congestion, with the amounts varying by freeway depending on road capacity and tra_c demand size. We calculate that the welfare bene_ts from the tolling are typically around USD 20 per lane-mile of road and hour. Under a plausible scenario, the optimal tolls charged on congested freeways in California yield annual aggregate bene_ts of up to USD 1.8 billion.

Suggested Citation

  • 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).
    • Handle: RePEc:sgo:wpaper:2402
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    File URL: https://zrr.kr/wTgR
    File Function: First version, 2024
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    More about this item

    Keywords

    Pigouvian tax; congestion externality; California freeway; quasi experiment; instrumental variable; big data;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other

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