Do parking fees affect retail sales? Evidence from Starbucks

Abstract

Parking meters are a common feature of urban areas, yet their economic impacts are not well understood. Local governments use meters to raise revenue and to ration scarce parking spaces. On-street parking, however, is seldom priced at the market rate. When inefficiently priced, parking meters may negatively affect the businesses and individuals they are intended to serve. This paper uses a quasi-experimental research design and an observational data set to assess metered parking policy. Sharp twice-daily changes in parking meter enforcement provide a comparison of customer traffic to a popular retail area in free and metered parking environments. Regression discontinuity results suggest that when there is an excess supply of parking (i.e., many spaces are vacant), a small 50 cent per-hour parking fee deters commerce. At two separate Starbucks establishments, the meter fee reduced customer traffic by almost 30%. However, when there is excess demand for parking (i.e., all spaces are constantly occupied), there is no evidence that meters help to increase customer traffic. These results suggest that sub-optimal meter pricing can impose substantial costs on nearby businesses.