Efficiency of speed limits in cities: A spatial computable general equilibrium assessment

Road traffic speed limits are suggested to be associated with, e.g., changes in travel times, vehicle operating costs, accidents, noise and emissions. In this paper we analyze the impacts of speed limit policies, i.e. restricting the maximum permissible road traffic speed, on an urban economy. While most existing studies do only focus on the effects of speed limits on frequency and severity of accidents, we provide a more general assessment of speed limit policies by employing a spatial computable general equilibrium model calibrated to an ‘average’ German metropolitan area. It is shown that besides transport related effects additional economic effects may influence the overall performance of speed limit policies significantly. Driven by spatial economic effects, tightening speed limits on all roads, i.e. setting a general urban speed limit of, e.g. 30km/h, lowers aggregate social welfare, although aggregate environmental and accident costs decline. However, setting speed limits around the city center only and not in suburban areas with access to beltways curtails negative effects on the urban economy and, in the end, may result in overall welfare gains. Therefore, our results suggest that implementing a general speed limit uniformly in the entire urban area, thus paying no attention to the spatial shape of the city and its road network, is likely to be an inadequate measure to enhance social welfare. However, restricting speed limits locally, thus focusing on the design of a ‘slow zone’, is essential and, in the end, is a more promising speed regulation policy having more likely the chance to enhance social welfare.