Assessing Motor Vehicle Quota Policies in China: Social Welfare Perspective

Abstract

Seven cities in China employ vehicle quota policies (VQPs) to mitigate urban traffic congestion. In these cities, vehicle licenses are allocated through a lottery, auction, or a mixture of the two. This study performs a policy assessment of China’s VQP with a social welfare perspective. It is argued that the issue is relevant to the selection of different modes of resource allocation, since an auction can match the precious resource with the individuals who value it most whereas a lottery meets the social expectation of equity. From the broad perspective of urban transportation, both auction- and lottery-based VQPs can be further improved by changing supplemental policies relevant to lottery entry, auction revenue usage, and vehicle purchase timing. VQPs should be used to help but not to replace travel demand management. As more cities in China adopt VQPs, this research can inform future policy making.