The fundamental law of highway congestion states that when congested, the travel speed on an expanded expressway reverts to its previous level before the capacity expansion. In this paper, we propose a theory that generalizes this statement and finds that if there exists a coverage effect, that is, the effect of longer road length on traffic conditional on capacity, then the new equilibrium travel speed could be lower than its previous level. Given the fundamental law, the theory predicts that the elasticity of traffic to road capacity is at least 1. We estimate this elasticity for national expressways in Japan and test this prediction. Using the planned national expressway extension as an exogenous source of variation for capacity expansion, we obtain elasticity estimates ranging between 1.24 and 1.34, consistent with the prediction of our theory. We further investigate the sources of the larger-than-unity elasticity and find that the coverage effect plays a critical role, compared with the effect due to lane expansion.
Traffic congestion, Fundamental law of highway congestion, Returns to scale, Speed function, Coverage effect, Japan
Asian Studies | Public Economics | Transportation
Journal of Urban Economics
HSU, Wen-Tai and ZHANG, Hongliang.
The fundamental law of highway congestion revisited: Evidence from national expressways in Japan. (2014). Journal of Urban Economics. 81, 65-76. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1531
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