The Cost of Traffic: Evidence from the London Congestion Charge

2020/11/25 by Cheng Keat Tang · 1 citation
Economics, Econometrics and Finance · #Housing Market and Economics #Economic and Environmental Valuation #Spatial and Panel Data Analysis

paper · pdf · doi:10.1016/j.jue.2020.103302

openalex publication_date 2020/11/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/31

Abstract

This paper exploits the implementation of the London Congestion Charge (LCC) to provide credible estimates on the willingness to pay to avoid traffic using the housing market. This policy curtails road traffic by imposing a fee on anyone driving into the charge zone. My results show that the LCC is associated with significant improvement in traffic conditions and housing values. Instrumenting local traffic conditions with the enforcement of the LCC, and limiting the analysis to properties proximate to the charge boundary, I find that the elasticity of housing values with respect to traffic is -0.30. These findings suggest that the consequential improvement in traffic conditions due to the LCC has generated substantial windfall of more than £3.8 billion for homeowners in the zone.

Citations

• Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition
• Valuing rail access using transport innovations
• A Unified Framework for Measuring Preferences for Schools and Neighborhoods

Cited by

• Congestion pricing [wikipedia]

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