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Chapter 6
Intracity transportation
In many ways, the literature on intracity transportation shares the same framework as interregional transportation in that it is important to distinguish between growth effects in economic activity and a reshuffling of economic activity around a city. We point out two key differences. First is the importance of intracity transportation for urban outcomes such as city size, urban sprawl, and labour markets, and second is the fact that intracity transportation infrastructure frequently attempts to address urban externalities like congestion and pollution.
Road transit: Cars, buses and BRT
Buses and cars share the road in cities, with bus rapid transit (BRT) buses differing from traditional buses in that these have dedicated lanes, allowing them to largely avoid congestion. The physical road network together with the network of public transportation infrastructure and policies like toll roads and High-Occupancy Vehicle (HOV) lanes determine the costs that drivers face, both in terms of direct fees but also in terms of travel times due to congestion, and can even affect the way that cities grow and develop.
Effect of road transportation on city geography and residents
By decreasing commuting costs from peripheral areas, radial or peripheral highways can promote city sprawl and development “out”. While studies from the US, China, and Spain have found that highways promote decentralisation of economic activity (Baum-Snow et al. 2017, Baum-Snow 2020, Garcia-Lopez et al., 2015), whether roads have the same effect on developing cities is less studied, and there are reasons to question whether the same mechanisms would hold in developing contexts. In general, the US model of car commuting from the suburbs may not reproduce itself in developing contexts which have lower rates of motorisation, especially among poorer residents who are frequently drawn to the relatively cheap urban periphery. On the other hand, as rates of motorisation rise in many emerging economies, developing country cities may converge to the commuting patterns observed in more developed ones. Bluhm et al. (2023) provide evidence from Chinese investments in transportation infrastructure in developing countries across the world that within-region economic activity decentralises in response to Chinese investments; given that per-capita measures of nightlights do not increase, this effect may be a reshuffling of people and economic activity into the periphery of treated regions.
The geography of road infrastructure also influences where residents and firms locate within a city, as access to commuting options increases both firms’ access to workers and residents’ access to desirable areas and jobs. If residents value transportation options, then infrastructure can also lead to sorting along socioeconomic lines if wealthy residents have a higher willingness to pay than poor residents for transit amenities. Tsivanidis (2023) studies the development of the TransMilenio BRT in Bogota using a quantitative urban model of commuting. His model highlights why the gains from a transit option are larger than just time saved, as firms and workers benefit from improved market access. He also finds that the benefits of the expansion were not particularly pro-poor; despite the fact that the poor use public transit more, general equilibrium changes in wages and housing prices hurt them more more on net.[1] Furthermore, because he finds that low wage workers are more indifferent between the location of work than the rich, the poor were less affected by the previously high transportation costs that kept them working near where they lived. Balboni et al. (2020) also use a quantitative spatial model to study the development of a BRT line in Dar es Salaam. They find that the gains were slightly pro-poor as there do not seem to be strong preferences among residents for living in certain locations nor strong localised externalities.
Transit mode options matter, but so does the quality of the road itself. Gonzalez-Navarro and Quintana-Domeque (2016) implement an experiment to study road paving in Mexico, and find that property values increased along paved roads and that residents were able to leverage these increased property values to increase durable good consumption. This paper also provides a rare opportunity to estimate how much residents value transit in a developing context; while there is a well-established literature in developed countries that uses changes in housing prices (hedonics) to study how much residents value access to transportation,[2] this has largely eluded developing country settings which may have incomplete property rights and frequently lack data on property transactions and prices.
Roads and congestion
New data sources from popular cell phone applications have opened opportunities to study traffic and congestion, revealing just how slow speeds are in developing country cities. Delays, measured in the minutes it takes to travel one kilometre, are 3-6 times larger in Jakarta and Delhi than in Los Angeles (Hanna et al. 2017), and speeds in rich country cities are about 50% faster than in poor country cities (Akbar et al. 2023b). While some of this difference in speeds is due to traffic congestion, poor infrastructure quality and design can also imply that speeds are slow even without traffic; Akbar et al. (2023a) characterise travel costs in Indian cities and find that Indian cities are very slow even at hours without congestion.
Just how costly congestion and slow speeds are to commuters is unclear. Kreindler (2022) approaches this question by pairing a structural model with an experiment that introduces a type of peak hour pricing, and finds that congestion incurs little deadweight loss. This result is driven by the finding that commuters have strong preferences for departing at a given time, suggesting that policies that attempt to shift traffic patterns are unlikely to be effective. Akbar and Duranton (2017) reach a similar conclusion in a different setting using very different methods. They use synthetic trips generated by Google Maps to estimate the elasticity of the time cost of travel with respect to vehicles, and find that the time cost of travel is very unresponsive to the number of commuters which implies a small congestion externality.
Independent of the size of the congestion externality and the inefficiency it causes, slow speeds cost commuters hours of commuting time a year. While policies such as congestion pricing, HOV lanes, and congestion zones are commonplace in many developed country cities, there is little evidence on their effectiveness in developing countries. One paper that studies congestion policies is Hanna et al. (2017), who study the removal of HOV lanes in Jakarta. Comparing traffic on HOV roads and alternative roads before and after the change, they find that delays are significantly worse on both formerly-HOV and alternative roads when HOV is eliminated. While evidence from the US supports the “Fundamental Law of Road Congestion”, the idea that increasing the quantity of lanes is not an effective strategy for alleviating congestion as more cars enter when speeds increase (Duranton and Turner 2011), developing country cities often have a much lower stock (supply) of roads which may be inadequate given recent urban growth. Apart from congestion, road quality, route placement, traffic policy, encroachment into the street, or driver behaviour may be behind the slow speeds experienced in developing countries (Akbar and Duranton 2017, Akbar et al. 2023b), suggesting a different set of policies that could increase speeds by addressing these other causes.
Other externalities of road transportation
Congestion is not the only externality generated by vehicles; cars and traditional buses emit greenhouse gases, carbon monoxide (CO) and particulate matter (PM) which can have direct effects on residents’ health. Indeed, the high concentrations of pollutants present in developing cities may mean that these damages could be larger than those found in developed settings (Arceo et al. 2016). Adding to the regulatory challenge of vehicle externalities in these contexts (Davis 2008, Oliva 2015) is the fact that the fleet in these cities is often older, and thus more polluting, noisier, and less safe on average (Barahona et al. 2020). Another potential externality is public safety. Road accidents kill 1.3 million people each year worldwide, mostly in developing countries. Habyarimana and William (2015) evaluate the impact of evocative messages on road accidents delivered on stickers placed inside Kenyan matatus or minibuses. They find that the intervention is effective and can reduce road accidents and average moving speeds in the vehicles assigned to treatment. More research is needed on how cars in developing cities can and should be regulated in light of these factors, and what the external costs of vehicular transit are in rapidly motorising developing cities.
Do developing country cities have the right amount of public transportation?
An important policy question is how much transportation is optimal and how transportation systems should be designed. Kreindler et al. (2023) study the development of a BRT system in Jakarta by pairing the empirical setting with a network routing model. They find that given a fixed number of buses, the optimal BRT network would be substantially more extensive than the existing network, despite the fact that this expanded network would imply longer wait times which commuters dislike. Similarly, Conwell (2023) studies minibuses in South Africa, and using a matching model for buses and commuters finds that minibuses are under-provided in the city; welfare would increase as wait times decrease with increased bus provision. These findings complement evidence from recent investments in formal, public BRT systems that deliver positive welfare gains to residents (Tsivanidis 2023, Balboni et al. 2020), suggesting that public transit options have not maxed out their potential in these cities.
Subways, light rail and cable cars
Roads are not the only method of movement in urban areas; subways and light rail circumvent road congestion by having their own dedicated rails, and cable cars have emerged in developing country cities with settlements located on rugged or steep terrain.
Effect of rail transportation on cities
Like highways, rail transportation also lowers commuting costs from the periphery, but the limited spatial access to rail lines mutes the potential to induce sprawl relative to roads. Using data from night lights, Gonzalez-Navarro and Turner (2018) indeed find that subways cause cities to decentralise, but the effect is smaller than that found for highways. Within a given city structure, these transportation methods can have consequences for the geography of economic and other activities in a city.
Zarate (2023) combines empirical evidence from subway openings with a quantitative spatial model to highlight how access to transit can mean access to formal jobs for workers in remote locations. He finds that the gains from new subways are significantly amplified when one takes into account the increased labour market efficiency of better-connected workers. Using similar methods, Khanna et al. (2022) study the effect of the rollout of cable car stations in Colombia, finding that inhabitants of high-crime neighbourhoods where cable car stations opened were less likely to be arrested for a crime and more likely to be formally employed. Together, these papers show how transportation options in urban areas have the potential to connect residents to opportunity.
Other novel work has looked at the effect of rail transit on innovation. One recent example is Koh et al. (2022) who study the case of the Beijing subway system expansion and find that an hour reduction in travel time between two locations causes the number of patents on which innovators located in those locations collaborated to increase by 15% to 38% on average.
Urban rail and externalities
Rail is often cited as a promising solution to urban air quality problems, as it is typically powered by electricity and has the potential to displace trips using internal combustion vehicles. Gendron-Carrier et al. (2022) use satellite measures of particulate matter to study the impact of subways on urban air pollution, and find that subways decrease air pollution by about 4%, but only among cities that at baseline have high pollution levels (above 28 µg/m3 PM2.5). As their discussion emphasises, the potential for rail to decrease emissions or congestion depends critically on the substitution patterns of commuters and whether or not they replace vehicle trips with rail trips. Gu et al. (2021) find corroborating evidence of subways substituting for motorised trips using the experience of China’s subway expansions. When a new subway line opens, they find 4% faster automobile rush hour speeds along the direction of the subway line, consistent with substitution, and providing evidence of the mechanism underlying the improved air quality result in Gendron-Carrier et al. (2022). While growing, this small subfield requires further study using developing country data to better understand residents’ travel mode decisions and the consequences that these preferences have for the ability of public transportation to address urban externalities.
Discussion and open questions
Intracity transportation modes connect residents and firms, and generate benefits beyond just travel time saved by increasing firms’ access to workers and workers’ access to jobs. In spite of recent advances, there is still a lot to be learned about transportation in urban areas. The internal structure of cities is challenging to study because finely disaggregated data on residents, firms, commuting, and property prices are frequently unavailable in developing country cities. However, in recent years new, innovative sources of data from satellites, cell phones, private pollution monitors, Google Maps, and others are making new areas of empirical study possible.
One set of open policy questions is centred around the provision of public transportation and its costs and benefits. There is scant evidence on what politically feasible policies would be effective at expanding and improving the quality of public transit systems in developing country cities (a problem made salient by the low quality of the Jakarta BRT documented in Gaduh et al. 2022). For example, what is the substitutability or complementarity between different transit options and how does this affect the magnitude of the gains to residents? On the cost side, does the geography of a city matter for the costs and feasibility of infrastructure investments? Moreover, it is also critical to understand how the spatial structure of cities may determine the optimal transportation network and the amount of public transportation. There are two patterns of urban spatial growth: cities that grow outward and remain relatively low-built and cities that grow vertically and need less land to expand (Lall et al. 2021). Ahlfeldt et al. (2023) find that the construction of tall buildings between 1975 and 2015, driven by reductions in the costs of height, has allowed cities to accommodate larger populations on less land. In that sense, evaluating the design of transportation networks and the amount of public transit in contexts where technologies to build tall buildings are cheaper is critical.
As incomes rise, it is also unclear how cities will fare under increased motorisation or if increased motorisation is an inevitable consequence of higher incomes.[3] Likewise, less is known about the impact of new technologies such as ride-share apps and the rise of delivery services on the transportation landscape of developing cities.[4] Finally, quantifying the magnitude of the mortality and pollution externalities associated with private vehicle use is an important area for future research as the size of these costs is a critical input for determining optimal regulation.
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