Study Of The Impact Of China Urban Traffic Congestion On Labor Productivity

Spatia l agglomeration is a feature of modern economic activity. Urban trafficcongestio n increases with agglo meratio n of economic activity. Prior to reaching thedesign capacity of road network, traffic dens ity growth will reduce the average roadcost, and enhance the freque ncy o f economic activity or people contacts dista nce. Itwill he lp improve factor productivity, spillo ver effects and agglo meration econo my.However, once urban vehic le dens ity exceeds the design capac ity of urban roads, eachadditio nal car reduces speed of everyone e lse, and generates agglo merationdiseconomies. Researching on the optima l ve hic le density fro m the perspective ofurban economic e ffic ienc y will he lp ide ntify its impact on urban econo mic effic ie ncyon one hand, and provide an important basis for urban tra nsportation p lanning andconstruction on the other hand.Built on the mechanis m of externa lity of traffic congestion and the optimizationof residents a nd firms, this paper constructs a ge neral equilibrium model and uses apanel dataset of China’s268prefectural or higher-level cities for2003-2011toexamine the e ffect of vehic le dens ity o n labor productivity. The econo metric ana lys isproduces the fo llowing results. Vehic le density and productivity had an inverted Ushaped relationship, the large cities with a population greater than one million and theother sma ller cities had optima l dens ities of2028and2849vehic les per squarekilo meter, respectively. The number of congested c ities increased fro m10in2003to130in2011and during this period the loss of productivity due to congestion grewfro m RMB26billio n to RMB660billio n, of whic h638.5billio n were accounted forby77large cities. Capital investment in city streets and brid ges raised road capacity,a10%increase in the capita l stock raised road capacity by17%, and the economicreturn on the investme nt in large c ities was muc h higher tha n the capita l cost whilethe return on the investment in sma ller cities was much less than the cost. Theresearch findings have important imp lications in po licy prescription.