Economic Implications of Traffic Congestion

Glen Weisbrod

Economic Development Research Group, Inc.

2 Oliver Street, 9th FloorBoston, MA 02109

www. edrgroup.com

Overview: Themes & Issues

Issues What is it? …… How do we view

congestion? Who cares? …. How does it affect peoples

lives? Why worry? …. Implications of scenarios? What can I do? Applying benefit-cost

analysis.

ThemesOver-simplification. We simultaneously over- and under-

estimate congestion impacts by failing to recognize differences among locations and elements of the economy.

Problematic distinctions. Analysis is made more difficult by distinctions between people, business and government.

Motivations

Transport Efficiency

Local Economy

Environmental Impact

What is Congestion ?

Different Motivations & Measures

Measures

Throughput: LOS, Volume, Speed

Income, Cost of Living: Jobs, Income, Taxes

Quality of Life: Frustration, Air Quality

What is Congestion?

Different Perspectives

Traffic Engineering Perspective System throughput is degraded

Consumer Perspective Wasting time, $$, diminished accessibility to shopping, recreation, job alternatives

Business Perspective Wasting time, $$, diminished accessibility to labor, customer, supplier markets

We do care

about these two!

So What!

How are people affected?

Time and Costs Impacts

Aspects of Congestion Longer average travel times Greater frequency of incident delays

Implication for the Economy Increased payroll to offset commute costs Increased payroll for more drivers, longer hours* Higher vehicle operating costs* Excess production, spoilage, processing costs* Schedule padding due to possibility of incidents* * Freight costs accrue to the true users: shippers and receivers

over-rated

under-rated

How are people affected?

Examples of Business Impacts

Overnight Delivery Services – require earlier pickup deadlines, allow for fewer deliveries per driver

Concrete mixer trucks – shrink delivery area or allow for more spoilage

Manufacturers – pay overtime for processing deliveries, accept delays for just-in-time production

Shippers, Air/Water Ports, Railroads – miss deliveries (outside of acceptable times) or pad schedules

The view of economic geography

Why care about accessibility?

Economic Geography… Urban agglomerations, large cities are due to economic benefits of accessibility

For some businesses… Scale economies from clustering similar & complementary businesses; access to larger, more diverse customer, labor, supplier markets

For some consumers… Benefits of opportunities for cultural, recreational, shopping, job alternatives

The view of economic geography

How congestion affects access

Besides using up time and money…Congestion reduces accessibility and its benefits

For some businesses… Reduced scale economies from access to diverse customer, labor, supplier markets

For some consumers… Reduced benefits from access to cultural, recreational, shopping & job alternatives

How do businesses react?

Results of Business Surveys

Prior NCHRP Study: Ask businesses in areas of growing congestion about

problems caused by congestion Result: “self-selection bias”

• Only the Survivors are left; We can’t find those that closed or moved away

• Those who are left either thrive under congestion or have adjusted* to it

*adjustments include changes in delivery area, times and drivers

How do businesses react?

Typology of Business Impacts

New NCHRP Study: Classify businesses & production functions based on

technology, products, markets (Chicago, Philadelphia) Result: differential sensitivity

• Some businesses thrive in high-density districts (tourism attractions, financial centers, restaurants)

• Other businesses depend on wide customer and delivery markets with reliable production and delivery scheduling (specialty products & services)

Implications of Scenarios…

Nature of Business Adjustments

Elasticity of Substitution Among Inputs… Most cost sensitivity & substitutability for homogenous skill

occupations (sales, guard, clerical, cleaning jobs) and commodity products (foods). When congestion grows, businesses substitute closer sources. When congestion is reduced, markets expand and longer trips are induced.

Least cost sensitivity & substitutability for specialized skill occupations (executive, management, precision trades) and differentiated products (manufacturing). They draw from wider markets, so businesses pay costs for maintaining access to them. When congestion is reduced, those businesses save the most.

Sensitivity to Congestion Cost, by Occupation

10

11

12

13

14

Concentration of Business,by Location in Urban Area

Implications of Highway - Economic Models…

Examples of Alternative Scenarios

Truck Delays in the Downtown Office District. Impact. Impact is concentrated in CBD, due to dependence on incoming supplies and relatively little outgoing deliveries.

Truck Delays in Industrial Zone. Impact is widely distributed throughout the metro area, due to broad pattern of truck delivery patterns to/from the zone.

Commuting Delays Region-wide. Impact is greatest for businesses on periphery of metro area, due to longer commuting and delivery times there.

(Chicago and Philadelphia test studies)

To assess congestion effects

Cost-Benefit Analysis

In its fundamental form, CBA…

Lines up (compares) all benefits and costs Can measures money impacts as well as non-money

impacts (including quality of life, environment)*

Can recognize equity (distribution of positive and negative impacts) as well as efficiency (overall net impact)

* using revealed preferences such as property values, stated preferences such as willingness to pay or tradeoff analysis

Economic impacts of congestion span consumer and business sectors. They affect availability & diversity of jobs, shopping & recreation opportunities for people, as well as their disposable incomes and cost of living. All of this is part of the quality of life.

Consider all impacts in terms of how they affect people. Then we can see economic, environmental and social impacts as quality of life tradeoffs, rather than pitting residents vs. business vs. government.

How do economic impacts fit in ?

Documents on the Web

Library of Economic Impact Studieswww.edrgroup.com/pages/library.html

NCHRP Report 463, Economic Implications of Congestionwww.edrgroup.com/pages/n15.html

"Benefit Cost Analysis Policy Issues in the Era of TEA-21" www.edrgroup.com/pages/pdf/TEA21-BC2001.pdf