The Short-run Effects of Congestion Pricing in New York City

New York City became the first city in the US to introduce a congestion charge for vehicles entering Manhattan’s Central Business District (CBD). The new fees, introduced in January of this year, include $9 for passenger cars, $4.50 for motorcycles, and a fee in the $14.40–$21.60 range for trucks and buses. There are also surcharges on taxis and Uber-like services.

A recent paper estimates the effects of the new policy. The data is based on Google Maps Traffic Trends. The methodology is a type of difference-in-differences. In the standard diff-diff approach we have a “natural” control group. Not so in the present case. What the paper does is to compare changes in NYC before and after the policy to changes in outcomes observed in other cities, which they combined into a “synthetic control.”

The figure below illustrates one of the several effects of congestion pricing. Specifically, the vertical axis measures the difference-in-differences effect on average speed of vehicles in the CBD.

The authors find that “speeds within the CBD increased by 16% in the first two months after the policy was implemented, leading to an 8% reduction in average travel times for trips to and within the CBD.” They also argue that this led to “decreases in vehicle CO2 emission rates” and had “no statistically significant impact on local air quality.”

Finally, the authors examine possible distributional effects, taking advantage of the significant difference in average income across NYC tracts: “Median household incomes in the NYC metro area range from approximately $44,500 for the average tract in the bottom quintile of the distribution to $182,000 for the average tract in the top quintile.”

The paper finds no significant negative distributional effects. If anything, the estimates suggest that “the positive effects on speeds have been greatest in the bottom quintile of income distribution.”

Cody Cook, Aboudy Kreidieh, Shoshana Vasserman, Hunt Allcott, Neha Arora, Freek van Sambeek, Andrew Tomkins, and Eray Turkel

“The Short-run Effects of Congestion Pricing in New York City”

NBER Working Paper 33584