Measuring Economic Costs of Urban Traffic Congestion to Business

Key findings are provided 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 impact 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 be applied in the future 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.