Department of Economics, UCSD

We evaluate whether driving restrictions improve air quality.  While Milan's restriction decreases overall air pollution, there is a significant behavioral response that attenuates the effect.  Our study expoits the natural experiment created by an unanticipated court injunction suspending Milan's restriction.  Drivers respond to the restriction with: 1) intertemporal substituion toward the unpriced period; 2) substitution toward exempt vehicles; and 3) spatial substitution toward unpriced roads.  Importantly, the net effect on traffic varies with public transit availability.