Measuring Economic Costs of Urban Traffic Congestion to Business

Abstract

This paper provides key findings from NCHRP Study 2-21, which examined how urban traffic congestion imposes economic costs within metropolitan areas. Specifically, the study applied data from Chicago and Philadelphia to examine how various producers of economic goods and services are sensitive to congestion, through its impacts on business costs, productivity and output levels. The data analysis showed that sensitivity to traffic congestion varies by industry sector, and is attributable to differences in each industry sector's mix of required inputs and hence its reliance on access to skilled labor, access to specialized inputs and access to a large, transportation-based market area. Statistical analysis models were applied with the local data to demonstrate how congestion effectively shrinks business market areas and reduces the "agglomeration economies" of businesses operating in large urban areas, thus raising production costs. Overall, this research illustrates how it is possible to estimate the economic implications of congestion, an approach that may in the future be applied for benefit-cost analysis of urban congestion reduction strategies or for development of congestion pricing strategies. The analysis also shows how congestion reduction strategies can induce additional traffic as a result of economic benefits. OVERVIEWWhile it is clear that increasing traffic congestion does impose costs upon travelers and affect broader business operations, it has been difficult to develop and apply empirical measures of the extent of those economic costs. This paper describes a new modeling approach for analyzing how urban traffic congestion affects businesses and metropolitan-wide economic activity, based on results of NCHRP project 2-21. The paper is organized into five parts: (a) background on the nature of the analysis problem, (b) general approach for analyzing congestion costs, (c) calibration of statistical analysis models, (d) application of scenarios to assess the nature of congestion impacts, and (e) conclusions. BACKGROUND Defining Congestion.Traffic congestion is defined as a condition of traffic delay (i.e., when traffic flow is slowed below reasonable speeds) because the number of vehicles trying to use a road exceeds the design capacity of the traffic network to handle it. Traffic congestion is widely viewed as a growing problem in many urban areas because the overall volume of vehicular traffic in many areas (as reflected by aggregate measures of vehicle-miles or vehicle-kilometers of travel) continues to grow faster than the overall capacity of the transportation system. The resulting traffic slowdowns can have a wide range of negative impacts on people and on the business economy, including impacts on air quality (due to additional vehicle emissions), quality of life (due to personal time delays), and business activity (due to the additional costs and reduced service areas for workforce, supplier and customer markets). This study focuses specifically on the latter type of impact --how roadway traffic...

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