Pricing Congestion to Increase Traffic: The Case of Bogotá

Juan-Pablo MonteroPublicationsResearch areaResearch FellowsSectoral PoliciesWorking papersComments Off on Pricing Congestion to Increase Traffic: The Case of Bogotá
Author(s) :
Juan-Pablo Montero, Felipe Sepúlveda, Leonardo J. Basso

In September 2020, the city of Bogotá introduced a major market-based reform to its odd-even driving restriction, better known as Pico y Placa. Drivers now have the option to pay a daily fee to be exempted from the restriction. Despite the increase in traffic—a 9% drop in average speed—we find substantial welfare gains from the reform, US$222 million per year. An important fraction of these gains—31%—comes from simply “abolishing” the restriction, i.e., setting the exemption fee equal to zero; the rest from setting a strictly positive fee, US$9 per day. The big winners of the reform are middle-income individuals who now use their cars more often (their gains amount to US$759 million), whereas the big losers are high-income individuals who now spend more time in traffic (their losses amount to US$506 million).