This study examines how urban traffic congestion affects producers of economic goods and services in terms of business costs, productivity, and output, and how producers are variously sensitive to congestion. This sensitivity to traffic congestion is attributable to a particular industry sector’s reliance on skilled labor or specialized inputs and a large, transportation-based market area to obtain those inputs. Congestion effectively contracts the market area for inputs, bidding up their costs, thus increasing production costs. Industries can compensate for congestion and reduce costs partially by location choices as well as other strategies. The most important aspect of this study is that it provides a measure of the real monetary cost of congestion to local or regional economies, which is more complete than the accounting of user expense and travel time cost only. This includes incorporation of additional productivity costs associated with travel time variability, worker time availability, freight inventory and logistics/scheduling, just-in-time production processes, and economies of market access. The study also incorporates realistic production functions, http://gulliver.trb.org/publications/nchrp/nchrp_rpt_463-a.pdf / http://gulliver.trb.org/publications/nchrp/nchrp_rpt_463-b.pdfwhich recognize the ability of businesses to substitute among inputs (and workers) to some degree, as they adjust to the higher costs of travel. This effect is of particular note, for it helps to reconcile transportation impact analysis methods with more aggregate studies of the relationship between business productivity and This report may be accessed by Internet users at transportation investment. It also provides insight into the effect of travel time reduction on induced growth of traffic. The economic analysis further demonstrates how congestion effectively shrinks business market areas and reduces (eliminates) the scale economies (agglomeration benefits) of operating in large urban areas. The end product is the demonstration of a general approach that can be applied for broad analysis of the economic costs of congestion around the country. The model results indicate that a congestion alleviation strategy that explicitly considers effects on firms in terms of their costs of doing business can provide a fuller picture of the trade-offs among alternative investments than a traditional comparison based on user costs (and occasionally also external costs). (A)
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