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

Jinwon Kim, Jucheol Moon () and Dongyun Yang ()
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Jucheol Moon: Department of Computer Engineering & Computer Science, California State University, Long Beach
Dongyun Yang: Department of Economics, The University of Texas, Austin

No 2402, Working Papers from Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy)

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.

Keywords: Pigouvian tax; congestion externality; California freeway; quasi experiment; instrumental variable; big data (search for similar items in EconPapers)
JEL-codes: H23 Q59 R41 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2024
New Economics Papers: this item is included in nep-env, nep-pbe, nep-tre and nep-ure
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