Traffic congestion is associated with enormous time, fuel, environmental, and health costs. As traffic congestion worsens around the world, it is becoming increasingly crucial to understand how congestion policies affect mobility and the economy. In the first chapter, I present stylized facts about traffic congestion. I document the extent to which traffic congestion in the US has worsened. I also discuss the implications and limitations of supply side investments such as highway expansions or transit constructions. Lastly, I present case studies of demand side investments, which aim to balance the demands for travel using the existing infrastructure. In the second chapter, I estimate the effects of highway congestion pricing on traffic using spatial panel data on real-time traffic speed and flow in California. I provide reduced form estimates to determine the degree to which traffic diverts from toll to non-toll lanes using a policy change in the Los Angeles area in which a subset of non-toll lanes on Interstates 10 and 110 were converted to toll lanes with dynamic pricing. Results provide supporting evidence that in the short run, drivers avoid toll costs by mostly switching from toll lanes to non-toll lanes; over time, changes in the spatial distribution of residential and work locations induce further adjustments in driving routes. This implies that individual responses may involve not just changing where they drive, but also where they live or work. In the third chapter, I estimate the aggregate effects of congestion pricing by taking into account where people live, work and drive. I develop a quantitative urban model with endogenous commuting costs in which residential and commercial locations, driving routes, travel times, and toll costs are simultaneously determined. Based on model estimates, I estimate both the partial and general equilibrium effects of congestion pricing. In the partial equilibrium analysis, which holds the locations of residences and workplaces fixed, congestion pricing induces a spatial leakage of traffic externality as people divert from toll lanes to non-toll lanes; this reduces annual aggregate welfare by $1.8-$11.0 million. However, in the general equilibrium analysis, which allows for adjustments in residences, workplaces, and driving routes, congestion in the overall road network decreases because people re-sort to reduce commuting distances. In aggregate, when net toll revenues are redistributed, annual welfare increases by $2.4-$11.6 million.