Welfare losses of road congestion: Evidence from Rome

We estimate the marginal external cost and welfare losses due to congestion for a large number of roads in Rome, Italy. We show that the marginal external cost is substantial, equaling about two thirds of the private time cost of travel. About one third of this cost is borne by public transport users. Our results imply that policies designed to reduce congestion can result in important welfare gains. •We estimate welfare losses due to travel delays caused by congestion.•We also estimate the marginal external congestion cost of travel.•We account for delays of private motor vehicles and buses.•We use traffic and bus micro-data from Rome.•We find substantial costs of congestion.