The Spillover Effect of Driving Restrictions on Intercity Travel

ABSTRACT For intercity travel, can the variety of available modes of transportation affect travelers' destination choice? In this paper, I address this question by studying the spillover effect of driving restrictions, an environmental policy that keeps cars off the street largely on the basis of the last digit of the license plate number. Specifically, this paper evaluates the effects of driving restrictions enacted in 42 cities across six adjacent Chinese provinces and province‐level municipalities from 2020 to 2023, and exploits differences in the timing of the policies across cities by embedding the two‐way fixed effects estimator in a gravity‐type model. I measure intercity travel using high‐frequency data from a provider of smartphone Location Based Services. I find that increased driving restrictions among neighboring cities increased travel flows between adjacent unrestricted cities, but not between adjacent restricted cities. The spillover effect extended beyond neighboring cities and influenced travel between non‐adjacent cities. In addition, the spillover appears to stem from leisure‐related rather than work‐related travel. Thus, travelers' preferences over modes of transportation may sometimes be stronger than their preferences over destinations, a result that highlights the importance of road connectivity for cities that wish attract travelers and the economic resources they bring.