This paper examines the effects of road capacity expansion on traffic volumes, population, and employment in Great Britain between 2001 and 2020, using annual data for 218 Travel-to-Work Areas and an instrumental-variable strategy based on historical railroads. We find a more-than-proportional elasticity of vehicle kilometres travelled (VKT) with respect to lane kilometres: a 10% increase in road capacity raises VKT by nearly 19%. However, this elasticity varies systematically across space, declining with urbanization and converging toward unity in highly urban areas. Disaggregating by vehicle type reveals that induced demand is primarily driven by private cars in urban areas, while commercial vehicles play a large role in rural areas. We also document positive but less-than-proportional effects of road expansion on population and employment. An accounting exercise shows that roughly one quarter of traffic growth operates indirectly through demographic and economic adjustments. Overall, our results provide a nuanced account of how road expansions increase traffic while also generating broader economic effects consistent with welfare gains.

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17 September 2024     Paper Number CEPDP2034

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This CEP discussion paper is published under the centre's Urban programme.