Measuring the externalities of urban traffic improvement programs

In this article we present a methodology to improve the economic analysis of urban transportation programs by measuring the externalities, and we demonstrate its application to a case study of a large scale park & ride facility in Buenos Aires, Argentina. The externalities accompanying changes in transportation systems can be significant, even exceeding the magnitude of the intended benefits. Nevertheless they are difficult to measure, because they involve subjective values that are not traded in the market. We measure the subjective value of lower traffic congestion by means of three metrics: travel time, traffic accidents, and noise. A perceptual scale is created to make the latter metric operational for the first time, to the best of our knowledge. We implement a generic choice experiment to elicit the preferences of the individuals, and a mixed logit model to obtain the value rates of the externalities. The generic experiment, in contrast to specific modal choice stated preferences applications frequently used, focuses on the effects, then it is applicable to a wide range of transportation programs. The case study involves a park & ride facility whose demand was determined in a previous paper. We show via stylized discounted cash flow analysis that the value for the users is not sufficient to justify the investment. However the positive externality generated by lower traffic congestion in the city, measured by means of the subjective value rates estimated in the present study, turns the net present value of the project highly positive.