The effect of subway policies on gasoline consumption: Subway expansion versus fare changes

Abstract

Investments in urban light rail are meant to replace driving and alleviate emissions from road transportation, but little research has documented the direct link between alternative subway policies and gasoline consumption, leaving it unclear which subway policies are more efficient. Based on a unique dataset from a major gasoline retailer in China, this paper compares the effect of expanding the subway network with that of revising the fare. We find that both subway expansion and the fare change significantly impact gasoline consumption in the short run, but the effect of expanding the subway network is larger and more durable. A cost–benefit calculation also finds that subway network expansion is more cost-effective in reducing driving than changing the fare.