To reduce pervasive problems of traffic congestion and air pollution, many cities in developing countries have considered restricting vehicle ownership. There is no empirical evidence on these programs’ efficacy and costs, but other prior work suggests that not having a car increases the cost of commuting and limits the set of job opportunities. However, these prior studies do not address the endogeneity of car ownership. We leverage a unique policy, the Beijing license plate lottery, to estimate the effect of restricting vehicles on distance traveled and commuting time, while addressing the endogeneity of car ownership. We find that adding a car has little impact on total distance traveled or time spent traveling, but a large impact on mode of travel. While reducing car ownership by 20 percent and car travel distance by 10 percent in Beijing, this policy has not added significantly to overall distances traveled or commute times.
- Past research suggests car ownership reduces travel time and increases job opportunities—implying high costs of policies that limit ownership—but the research does not consider possible correlations between ownership and preferences for driving.
- Studying the Beijing license plate lottery system, we find that car ownership does not substantially affect total distance traveled or time spent traveling.
- Car ownership has a large effect on subway and bus use, however, and the lottery system has reduced car ownership by 20 percent and car use by 10 percent.
- In the future, because additional cars are used very intensively, rising rates of car ownership will substantially increase driving and congestion absent other policies aimed at reducing car use.