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The Welfare Cost of Beijing’s Lottery Policy: Evidence from a Contingent Valuation Survey

Published online by Cambridge University Press:  12 May 2023

Ping Qin ,
Yifei Quan Open the ORCID record for Yifei Quan [Opens in a new window] ,
Antung A. Liu Open the ORCID record for Antung A. Liu [Opens in a new window] ,
Joshua Linn  and
Jun Yang
Ping Qin
Affiliation:
School of Applied Economics, Renmin University of China, Beijing, China
Yifei Quan
Affiliation:
Institute of Energy, Environment and Economy, Tsinghua University, Beijing, China
Antung A. Liu*
Affiliation:
O’Neill School of Public and Environment Affairs, Indiana University, Bloomington, IN, USA
Joshua Linn
Affiliation:
Department of Agricultural and Resource Economics, University of Maryland, College Park, MD, USA Resources for the Future, Washington, DC, USA
Jun Yang
Affiliation:
Zhonghe New (Beijing) Energy Technology Research Institute Co., Ltd., Beijing, China
*
Corresponding author: Antung A. Liu; Email: aaliu@indiana.edu
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Abstract

Motivated by traffic congestion and air pollution, Beijing is one of several major cities to restrict vehicle ownership by requiring residents to win a lottery for the right to obtain an additional car. We examine the welfare cost of preventing people from owning cars because of misallocation: under a lottery, some individuals with low willingness to pay (WTP) for cars can obtain cars, while other individuals with high WTP cannot. We estimate welfare costs using a new contingent valuation method survey of Beijing lottery participants which we designed and conducted explicitly for this purpose. We find that restricting vehicle ownership reduced private welfare by 26 billion yuan. Back-of-the-envelope calculations suggest that the benefits of lower congestion and pollution roughly equal the costs. Our WTP estimates indicate a net welfare gain of approximately 32 billion yuan if Beijing’s lottery were replaced with an auction, which is similar to previous estimates.

Keywords

contingent valuation methodcost–benefit analysislicense plate lotteryvehicle ownership restrictionswillingness to payI38Q58R48
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 14 , Issue 2 , Summer 2023 , pp. 251 - 274
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Society for Benefit-Cost Analysis

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