A Contingent Valuation Approach to Estimating Regulatory Costs: Mexico's Day without Driving Program

Little is known about the cost of environmental regulations that target households instead of firms, partly because of significant methodological and data challenges. We use the contingent valuation method to measure the costs of Mexico City's Day without Driving program, which seeks to stem pollution and traffic congestion by prohibiting vehicles from being driven one day each week. To our knowledge, ours is the first study to focus directly on using stated preference methods to isolate and estimate the private costs of an existing environmental regulation. We find that the Mexican program's costs are substantial: up to US$130 per vehicle per year, which represents 1%-2% of drivers' annual income and implies total costs of US$617 million per year. Recent research questions whether driving restrictions programs like Mexico City's actually have environmental benefits. Our results suggest that whatever benefits these programs may have, they can be quite costly.