A New Route to Increasing Economic Growth: Reducing Highway Congestion with Autonomous Vehicles

Abstract

This paper argues that California’s self-help county tax legislation, which funds additional highway spending, amounts to a natural experiment that can be used to construct a valid instrument to determine highway congestion’s causal effect on the growth rates of GDP, employment, wages, and commodity freight flows for California counties. Our estimation results indicate that highway congestion has significantly reduced the growth rates of those performance measures. Extrapolating the results to the nation suggests that sizable reductions in highway congestion, which could be achieved with widespread adoption of autonomous (driverless) vehicles, would have large macroeconomic stimulative effects.