Efficiency and Equity Impacts of Urban Transportation Policies with Equilibrium Sorting

We estimate an equilibrium model of residential sorting with endogenous traffic congestion to evaluate the efficiency and equity impacts of urban transportation policies. Leveraging fine-scale data on household travel diaries and housing transactions with home and work locations in Beijing, we joint...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Panle Jia Barwick, Li, Shanjun, Waxman, Andrew R, Wu, Jing, Xia, Tianli
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2021
Subjects
Efficiency
Traffic congestion
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Summary:We estimate an equilibrium model of residential sorting with endogenous traffic congestion to evaluate the efficiency and equity impacts of urban transportation policies. Leveraging fine-scale data on household travel diaries and housing transactions with home and work locations in Beijing, we jointly estimate travel mode and residential location decisions. The estimation highlights the importance of incorporating work commute in housing decisions and features preference heterogeneity for the ease of work commute by gender. Counterfactual simulations show that while different policies can attain the same level of congestion reduction, their impacts on residential sorting and social welfare are drastically different. First, a driving restriction intensifies income-stratified urban structure where high-income households live closer to subway and work. Distance-based congestion pricing reduces the spatial separation between residence and workplace across income levels, while subway expansion does the opposite. Second, residential sorting strengthens the effectiveness of congestion pricing in improving traffic conditions but undermines that of the driving restriction and subway expansion. Third, the driving restriction is welfare reducing as it leads to large distortions on travel choices. Congestion pricing improves welfare but is regressive, highlighting the need to recycle revenue to address the associated equity concern. Finally, congestion pricing and subway expansion when combined deliver the largest congestion relief and efficiency gain and at the same time achieve self-financing, with revenue from congestion pricing fully covering the cost of subway expansion.