The Effect of Beijing’s Driving Restrictions on Pollution and Economic Activity

Abstract:     
We evaluate the environmental benefit and economic cost of Beijing’s driving restrictions. Based on daily data from multiple monitoring stations, air pollution falls 19% during every-other-day and 7% during one-day-per-week restrictions. Based on hourly television viewership data, the number of viewers during the restrictions increases 1.5 to 2.2% for workers with discretionary work time but is unaffected for workers without, consistent with the restrictions’ higher per-day commute costs reducing daily labor supply. In the short run, benefits from reduced morbidity and mortality likely exceed costs of reduced output. Causal effects are identified from both time-series and spatial variation in air quality and intra-day variation in viewership. The spatial variation tests provide a new means to disentangle confounding policy effects. We provide possible reasons for the policy’s success, including evidence of high compliance based on parking garage entrance records.

Number of Pages in PDF File: 58

Keywords: driving restrictions, externalities, environmental economics, pollution

JEL Classification: H23, D62, L51, J22, R41

working papers series