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Jonathan E. Hughes and Daniel Kaffine

Economic Inquiry, 2019, vol. 57, issue 1, 667-684

Abstract: Policies to encourage carpooling in high‐occupancy vehicle (HOV) lanes have been adopted in the United States to lower congestion and reduce air pollution. We analytically model highway congestion and other vehicle‐related externalities. Encouraging carpooling decreases total costs when congestion relief in mainline lanes outweighs increased HOV lane congestion. Importantly, entry of new drivers via induced demand can negate the benefits of increased carpooling. Using 10 years of traffic data from Los Angeles we estimate time and route‐specific marginal external costs. Because costs vary substantially across routes, hours, and days, current policies to promote carpooling will often increase social costs. (JEL R41, R48, Q53)

Date: 2019
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Handle: RePEc:bla:ecinqu:v:57:y:2019:i:1:p:667-684