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Should values of time be differentiated?

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Abstract

This paper discusses to what extent the valuations of travel time savings should be differentiated in applied social cost-benefit analysis. We derive a welfare rule which includes a social cost for monetary redistributions, giving a theoretical underpinning of a situation with a welfare-maximizing government that applies equal weights for all income groups. The welfare rule shows that for projects funded by tax payers, values of time should be differentiated with respect to marginal utilities of time, but not with respect to marginal utilities of income. We stress that to determine the relevant valuations of travel time savings, it is crucial who pays for and benefits from a project in the long run. This point has been somewhat ignored in the literature, but speaks in favour of using the travellers’ actual values of time. We present empirical evidence demonstrating that the variation in values of time, in the dimensions relevant for applied appraisal, primarily stems from differences in the marginal utility of time, due to for instance self-selection and comfort differences.

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  • Börjesson, Maria & Eliasson, Jonas, 2017. "Should values of time be differentiated?," Working papers in Transport Economics 2017:4, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    • Handle: RePEc:hhs:ctswps:2017_004
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    Cited by:

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    2. Tapia, Rodrigo J. & de Jong, Gerard & Larranaga, Ana M. & Bettella Cybis, Helena B., 2020. "Application of MDCEV to infrastructure planning in regional freight transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 133(C), pages 255-271.
    3. Lavieri, Patrícia S. & Bhat, Chandra R., 2019. "Modeling individuals’ willingness to share trips with strangers in an autonomous vehicle future," Transportation Research Part A: Policy and Practice, Elsevier, vol. 124(C), pages 242-261.

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    More about this item

    Keywords

    Appraisal; Cost benefit analysis; Equity value of time; Behavioural value of time; Value of time;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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