The National Academies

NCHRP 02-21 [Completed]

Economic Implications of Congestion

  Project Data
Funds: $299,995
Research Agency: Cambridge Systematics, Inc.
Principal Investigator: Donald Vary
Effective Date: 4/1/1997
Completion Date: 3/30/2001

Congested transportation facilities raise the cost of moving people and goods into, within, and out of regions and states. Costs associated with transportation continue to increase in importance as the challenges and opportunities of the global marketplace compel companies to change their business methods. Congestion, especially within metropolitan regions, is perceived to be reaching critical proportions and is imposing costs on business that are detrimental to economic efficiency, productivity, and competitiveness.

Despite increasing concerns about congestion, not enough is known about the impacts of congestion in terms of either economic efficiency or the expected economic effects of transportation investments designed to reduce congestion. Little is known about the consequences of congestion on the magnitude of business costs or the significance of such costs to industries. Although it is generally agreed that reducing congestion and its costs will increase economic productivity, the degree and manner of productivity improvements remain unclear.

State DOTs will never have sufficient capital to fully address all of the deficiencies in their transportation systems. Therefore, projects will continue to be prioritized and selected carefully. This research will assist state and metropolitan decision makers to design and implement congestion strategies that make sense for economic development and make the most effective use of scarce resources. The following will be addressed:

1. Analysis of the nature of the costs that congestion imposes on businesses and other users of the transportation system,
2. Analysis of the relative impacts of predictable and unpredictable congestion on costs of doing business, and
3. Quantitative estimates of the effects of congestion reduction on the economic productivity and cost structures of businesses in metropolitan regions.

The objective of this project is to quantify the impacts of congestion on the costs of production for a range of economic sectors within metropolitan areas. The intent is to estimate the elasticity of business costs with respect to congestion levels within metropolitan areas. Based on these cost relationships, an assessment methodology will be developed which will allow states and metropolitan planning organizations (MPOs) to estimate those direct economic benefits that can be expected to result from various transportation strategies designed to reduce congestion. This research should provide decision makers with an understanding of the implications of congestion on economic activities and should provide practitioners with the tools to analyze the costs of congestion on businesses.

Phase I--Project design, will consist of the following tasks: (1) Critically review relevant research, literature, and methodologies on the relationships between congestion and economic performance. (2) Assess alternative methods of defining and measuring congestion and recommend an approach for use in this project. Consideration should include highway access to intermodal facilities. (3) Develop a conceptual framework that links congestion levels to cost structures and other aspects of business operations. Consideration should be given to using cost function analysis, but other approaches will be entertained. (4) Design an analysis framework to estimate the impacts on congestion and economic activity for a range of congestion alleviation strategies. (5) Develop a proposed sample design for a range of metropolitan areas (in terms of size and congestion severity) and business sectors for the study. Identify sources of data for both manufacturing and non- manufacturing sectors. (6) Prepare an interim report and obtain approval to proceed to Phase II. Incorporate in the report a discussion of how the analysis framework developed in Task 4 relates to those identified in the literature and ongoing research reviewed in Task 1. Upon approval of the interim report, prepare a briefing paper that presents the Phase I findings on the impacts of congestion that is appropriate for the use by state DOTs during consideration of ISTEA reauthorization.

Phase II--Congestion impact analysis, will consist of the following tasks: (7) Secure and analyze data for selected metropolitan regions, sufficient to develop estimates of congestion impacts within the Phase I framework (Task 3), with special attention to the cost of congestion dimensions impacting selected business sectors. (8) Prepare an interpretation of the results through summary indicators such as cost elasticities and rates of return, etc. Indicators should be presented in terms of confidence intervals as well as point estimates. (9) Describe the economic significance of these indicators in terms of expected cost savings and other regional economic impacts from congestion reduction. (10) Prepare an interim report covering the Phase II activities and obtain approval to proceed to Phase III.

Phase III--Evaluation methodology, will consist of the following tasks: (11) Given the cost functions developed in Phase II for differing business sectors at varying levels of congestion, develop a practical methodology that decisionmakers can use to determine the costs of congestion in their metropolitan areas and assess the anticipated economic implications of changes in congestion levels. (12) Using the results of the previous tasks, assess the economic effects of alternative congestion reduction strategies. (13) Prepare a final report documenting the entire research effort. Include a description of additional research needed to develop improved understanding and approaches for managing congestion at the state and metropolitan levels. Provide specific recommendations for implementation and development of the results of this project.

Status: The project has been completed.

Product Availability: The final report was published as NCHRP Report 463. The contents of the CD-ROM referenced in the report, which documents the sketch-planning tool, are available as ZIP files below: 

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