The Welfare Consequences of Urban Traffic Regulations


We develop a structural model to represent individual transportation decisions, the equilibrium road traffic levels, and speeds inside a city. The model is micro-founded and incorporates a high level of heterogeneity: individuals differ in access to transportation modes, values of travel time, and schedule constraints; road congestion technologies vary within the city. We apply our model to the Paris metropolitan area and estimate the model parameters from publicly available data. We compare the road traffic equilibria under the welfare-maximizing policy and simple instruments (driving restrictions and uniform or per-kilometer road tolls) and measure the policies' consequences on the different welfare components: individual surplus, tax revenues, and costs of emissions.