Urban traffic externalities: Quasi-experimental evidence from housing prices

• We produce new and improved evidence on the valuation of urban traffic externalities.
• We combine a quasi-experiment and a fixed effect hedonic price estimation.
• A 50% lower traffic density induces a 1.4% increase in housing prices on average.
• When traffic density is already high, reductions in nuisance are valued more positively.
• Cross-sectional studies likely yield biased estimates of traffic nuisance valuation.

This paper exploits a quasi-experiment to value the benefits of reducing urban traffic externalities. As a source of exogenous variation we use the opening of a new bypass in The Hague, the Netherlands that reduced traffic on a number of local streets, leaving others unaffected. We make use of a unique longitudinal dataset on traffic densities and residential sales, and calculate the effect of the change in traffic nuisance on housing prices. We find that, on average, a reduction of 50% in traffic density induces a 1.4% increase in housing prices. Reductions in traffic nuisance are valued much more positively when the traffic density is already high. Furthermore, our results indicate that traffic nuisance effects are likely to be biased in cross-sectional studies.