Traffic Congestion’s Economic Impacts: Evidence from US Metropolitan Regions

Abstract

Traffic congestion alleviation has long been a common core transport policy objective, but it remains unclear under which conditions this universal byproduct of urban life also impedes the economy. Using panel data for 88 US metropolitan statistical areas, this study estimates congestion’s drag on employment growth (1993 to 2008) and productivity growth per worker (2001 to 2007). Using instrumental variables, results suggest that congestion slows job growth above thresholds of approximately 4.5 minutes of delay per one-way auto commute and 11,000 average daily traffic (ADT) per lane on average across the regional freeway network. While higher ADT per freeway lane appears to slow productivity growth, there is no evidence of congestion-induced travel delay impeding productivity growth. Results suggest that the strict policy focus on travel time savings may be misplaced and, instead, better outlooks for managing congestion’s economic drag lie in prioritising the economically most important trips (perhaps through road pricing) or in providing alternative travel capacity to enable access despite congestion.