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Is the intertemporal income elasticity of the value of travel time unity?

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Abstract

The purpose of this study is to estimate the intertemporal income elasticity of the value of travel time (VTT) and test whether it differs from one. The empirical analysis is performed on Swedish revealed preference data, where voluntary job changers' individual wage premium for commuting time changes is used as an estimate of VTT. The panel structure of the data implies the opportunity to use a lagged net income variable on individual level to estimate the income elasticity in an intertemporal way. The result does not support an intertemporal income elasticity of VTT that is different from one and this result is robust over several different empirical specifications. Hence, the policy implication of this study is in contrast to a recent recommendation by an EU-financed project, Heatco, which propose an intertemporal income elasticity of 0.7.

Suggested Citation

  • Swärdh, Jan-Erik, 2008. "Is the intertemporal income elasticity of the value of travel time unity?," Working Papers 2008:3, Swedish National Road & Transport Research Institute (VTI).
  • Handle: RePEc:hhs:vtiwps:2008_003
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    File URL: http://www.transportportal.se/SWoPEc/Elasticity_swardh.pdf
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    1. Vredin Johansson, Maria & Heldt, Tobias & Johansson, Per, 2006. "The effects of attitudes and personality traits on mode choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(6), pages 507-525, July.
    2. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, March.
    3. Fosgerau, Mogens, 2006. "Investigating the distribution of the value of travel time savings," Transportation Research Part B: Methodological, Elsevier, vol. 40(8), pages 688-707, September.
    4. Cantillo, Víctor & Heydecker, Benjamin & de Dios Ortúzar, Juan, 2006. "A discrete choice model incorporating thresholds for perception in attribute values," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 807-825, November.
    5. Hensher, David A. & Goodwin, Phil, 2004. "Using values of travel time savings for toll roads: avoiding some common errors," Transport Policy, Elsevier, vol. 11(2), pages 171-181, April.
    6. Isacsson, Gunnar & Swärdh, Jan-Erik, 2007. "An empirical on-the-job search model with preferences for relative earnings: How high is the value of commuting time?," Working Papers 2007:12, Swedish National Road & Transport Research Institute (VTI).
    7. Wardman, Mark, 2004. "Public transport values of time," Transport Policy, Elsevier, vol. 11(4), pages 363-377, October.
    8. Mogens Fosgerau, 2005. "Unit income elasticity of the value of travel time savings," Urban/Regional 0508007, EconWPA.
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    More about this item

    Keywords

    Value of travel time; Value of travel time savings; VTTS; Intertemporal; Income elasticity; Revealed preferences;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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