Pricing Congestion to Increase Traffic: The Case of Bogotá

Juan-Pablo Montero, Felipe Sepúlveda, and Leonardo J. Basso

February 2025

In September 2021, the city of Bogotá introduced a major market-based reform to its odd-even driving restriction, known as Pico y Placa. Since then, drivers have had the option to pay a daily congestion fee to be exempt from the restriction. We find that while the reform increased traffic, it brought overall benefits. The welfare gains of middle-income individuals, who now use their cars more often, far outweighed the losses experienced by their higher-income counterparts, who now spend more time in traffic. Additionally, we show that these overall benefits could quintuple if Bogotá were to expand the reform into a comprehensive road-pricing scheme, not to mention the extra gains in air quality.

Keywords: congestion, driving restrictions, road pricing, air quality

JEL Classification: H23, L62, R41, R48, Q53.