The fundamental law of highway congestion revisited: Evidence from national expressways in Japan


The fundamental law of highway congestion states that when congested, the travel speed on an expanded expressway reverts to its previous level before the capacity expansion. In this paper, we propose a theory that generalizes this statement and finds that if there exists a coverage effect, that is, the effect of longer road length on traffic conditional on capacity, then the new equilibrium travel speed could be lower than its previous level. Given the fundamental law, the theory predicts that the elasticity of traffic to road capacity is at least 1. We estimate this elasticity for national expressways in Japan and test this prediction. Using the planned national expressway extension as an exogenous source of variation for capacity expansion, we obtain elasticity estimates ranging between 1.24 and 1.34, consistent with the prediction of our theory. We further investigate the sources of the larger-than-unity elasticity and find that the coverage effect plays a critical role, compared with the effect due to lane expansion.


Traffic congestion
Fundamental law of highway congestion
Returns to scale
Speed function
Coverage effect

We have benefited from helpful comments from Jiahua Che, Gilles Duranton, Charles Y. Horioka, Tom Holmes, Nayoung Lee, Wallace Mok, Sung Yong Park, Liugang Sheng, Matt Turner, two anonymous referees, the Co-Editor, and seminar participants at Tsinghua University, the 2010 HKEA Sixth Biennial Conference, and the 2011 Annual Meeting of the Urban Economics Association. We would like to thank Kin Tai Cheung, Vincent Chow, Chuantao Cui, and Jia-Jin Wu for their research assistance. We are also grateful to Tomoya Mori for providing us the definition of urban employment areas. All errors are ours.

View full text