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Is traffic bad for business? Evidence from the London Congestion Charge Zone
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Co-authored with Marta Santamaria
Abstract:
We study the effects of the London Congestion Charge Zone (CCZ) on business activity in London in both the short- and long-term. The CCZ, a traffic-restriction policy established in 2003, introduced a daily cost for each motor-vehicle that entered the Congestion Charge Zone, which encompasses the centre of London. The effects of traffic-restriction policies on businesses are theoretically ambiguous depending on how traffic restrictions affect supply-side (higher transport costs for consumers, workers, and input providers) and demand-side factors (lower motorised-traffic but potential higher footfall of customers due to the reductions in traffic and pollution). We use administrative data on the universe of UK businesses from 1999-2009 and survey data on a subset of them, to explore how the introduction of the CCZ affected the number, size and composition of businesses and their performance, as captured by input costs, turnover, profits and sales. Using a ring-based difference-in-differences approach that allows for spillovers and event study designs, we find preliminary evidence of a short-lived decrease in the number of firms in neighborhoods inside the CCZ, with an increase in average firm size. Finally, sales from retail shops appear to increase on impact and this increase was sustained over time.
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