Welfare Costs of Urban Traffic through Retail Prices

34 Pages Posted: 21 Mar 2020 Last revised: 2 Jan 2024

See all articles by Hakan Yilmazkuday

Hakan Yilmazkuday

Florida International University (FIU) - Department of Economics

Date Written: December 30, 2023

Abstract

This paper investigates the welfare costs of urban traffic by considering its implications on consumer retail prices. Using retail price data for 40 goods and services from 70 cities (covering 47 countries) for multiple years, the estimation results suggest that the elasticity of retail prices with respect to the time spent in urban traffic is about 0.5. This elasticity is further connected to the welfare of consumers by using the implications of an economic model. The corresponding investigation shows that reducing the time spent in urban traffic by one minute improves consumer welfare by about 1.3% for the average city, with a range between 0.8% and 2.3% across cities. Several policy suggestions follow regarding how to reduce the time spent in urban traffic that would improve consumer welfare.

Keywords: Welfare Costs, City Traffic, Micro Prices

JEL Classification: O18, R41

Suggested Citation

Yilmazkuday, Hakan, Welfare Costs of Urban Traffic through Retail Prices (December 30, 2023). Available at SSRN: https://ssrn.com/abstract=3544457 or http://dx.doi.org/10.2139/ssrn.3544457

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

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