University of California Transportation Center

Claims that roadway investments spur new travel and thus fail to relieve traffic congestion, known as induced demand, have thwarted road development in both the United States and abroad. Most past studies point to a significant induced demand effect. This research challenges past results by employing a path model to causally sort out the links between investments and traffic increases, using data for 24 California free projects across 15 years. Traffic increases are explained in terms of both faster travel speeds and land-use shifts that occur in response to adding freeway lanes. While the path model confirms the presence of induced travel in both the short- and longer-run, estimated elasticities are generally lower than those of earlier studies. This research also reveals significant “induced growth” and “induced investment” effects – real-estate development has gravitated to improved freeway corridors and road investments have been shaped by traffic trends in California. Fighting road projects on the groups of induced-demand should be carefully considered. Energies might be better directed at curbing mispricing in the highway sector and managing land-use changes spawn by road investments.