Dr. Andrew Waxman from the University of Texas will present, “Efficiency and Equity Impacts of Urban Transportation Policies with Equilibrium Sorting” as part of the EEEPI Seminar Series on October 12, 2022.
Abstract: We estimate an equilibrium sorting model of housing location and commuting mode choice with endogenous traffic congestion to evaluate the efficiency and equity impacts of a menu of urban transportation policies. Leveraging fine-scale data from household travel diaries and housing transaction data identifying residents’ home and work locations in Beijing, we recover structural estimates with rich preference heterogeneity over both travel mode and residential location decisions. Counterfactual simulations demonstrate that even when different policies reduce congestion to the same degree, their impacts on residential sorting and social welfare differ drastically. First, driving restrictions create large distortions in travel choices and are welfare reducing. Second, distance-based congestion pricing reduces the spatial separation between residences and workplaces and improves welfare for all households when it is accompanied by revenue recycling. Third, sorting undermines the congestion reduction under driving restrictions and subway expansion but strengthens it under congestion pricing. Fourth, the combination of congestion pricing and subway expansion delivers the greatest congestion relief and efficiency gains. It can also be self-financed, with the cost of subway expansion fully covered by congestion pricing revenue. Finally, eliminating preference heterogeneity, household sorting, or endogenous congestion significantly biases the welfare estimates and changes the relative welfare rankings of the policies.
Speaker Bio: Andrew Waxman is an applied microeconomist examining the relationship between environmental outcomes, urban policies and inequality. Much of his work consists in trying to think about how household location decisions of place of work and residence have implications for levels of emissions from home electricity usage as well as from commuting using personal vehicles. The link between these sectors has important implications for the design of cities and for understanding the full effects of policies targeting housing or transportation. Dr. Waxman has also studied real-time pricing of congested freeways in Los Angeles and has worked on research exploring how public transportation capacity in cities affects the welfare of high- and low-skilled workers.