APPLIED ECONOMICS AND POLICY


Efficency and Equity Impacts of Urban Transportation Policies


SHANJUN LI


KENNETH L. ROBINSON PROFESSOR OF APPLIED ECONOMICS AND PUBLIC POLICY


Charles H. Dyson School


of Applied Economics and Management Cornell SC Johnson College of Business Cornell University


Co-authors • Shanjun Li Kenneth L. Robinson Professor of Applied Economics and Public


Policy, Charles H. Dyson School of Applied Economics and Management, Cornell SC Johnson College of Business, Cornell University


• Panle Jia Barwick, University of Wisconsin - Madison • Andrew Waxman, University of Texas - Austin • Jing Wu, Tsinghua University, Beijing, China • Tianli Xia, University of Rochester, Rochester, New York


Summary


Transportation plays a crucial role in shaping the urban spatial structure and the organization of economic activity. In many developing countries, rapid urbanization and motorization, together with poor infrastructure, have cre- ated unprecedented traffic congestion with severe economic consequences (Li 2018a; Akbar et al. 2023). To address these challenges, local governments around the world have implemented a suite of policies, including driving restrictions, public transit investment, congestion pricing, and gasoline taxes.


To evaluate urban transportation policies, the authors estimate an equilib- rium sorting model of housing location and commuting mode choice with endogenous traffic congestion. Leveraging fine-scale data from travel diaries and housing transactions identifying residents’ home and work locations, they recover rich preference heterogeneity over both travel mode and residential location decisions. While different policies produce the same congestion re- duction, their impacts on social welfare differ drastically. In addition, sorting undermines the congestion reduction under driving restrictions and subway expansion but strengthens it under congestion pricing. Te combination of congestion pricing and subway expansion delivers the greatest congestion relief and efficiency gains.


with Equilibrium Sorting American Economic Review, 114, 10, October 2024 LINK TO PAPER


CONTENTS TO MAIN


| RESEARCH WITH IMPACT: CORNELL SC JOHNSON COLLEGE OF BUSINESS • 2024 EDITION


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