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The Full Cost of Intercity Highway Transportation


  • David Levinson

    () (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

  • David Gillen


In this paper we review the theoretical and empirical literature on the cost structure of the provision of intercity highway transportation and specify and estimate our own cost functions . We develop a full cost model which identifies the key cost components and then estimate costs component by component: user costs, infrastructure costs, time and congestion costs, noise costs, accident costs, and pollution costs. The total long run average cost is $0.34 per vehicle kilometer traveled. The single largest cost category is freeflow travel time. While the marginal cost of infrastructure is higher than its average cost, indicating that new construction is increasingly expensive, the marginal cost of driving (user fixed and variable costs) is less than the average cost, indicating that by increasing travel the user can spread his fixed cost of a vehicle over more trips without penalty.

Suggested Citation

  • David Levinson & David Gillen, 1997. "The Full Cost of Intercity Highway Transportation," Working Papers 199704, University of Minnesota: Nexus Research Group.
  • Handle: RePEc:nex:wpaper:fullcostintercityhighways

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    References listed on IDEAS

    1. Small, K.A. & Kazimi, C., 1994. "On the Costs of Air Pollution from Motor Vehicules," Papers 94-95-3, California Irvine - School of Social Sciences.
    2. Clifford Winston, 1991. "Efficient Transportation Infrastructure Policy," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 113-127, Winter.
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    Cited by:

    1. Lei Zhang & David Levinson, 2006. "Economics of Road Network Ownership," Working Papers 200908, University of Minnesota: Nexus Research Group.
    2. Lei Zhang & David Levinson, 2005. "Road Pricing with Autonomous Links," Working Papers 200506, University of Minnesota: Nexus Research Group.
    3. David Levinson, 2002. "Identifying Winners and Losers in Transportation," Working Papers 200204, University of Minnesota: Nexus Research Group.
    4. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2009. "Technology and incentive regulation in the Italian motorways industry," Journal of Regulatory Economics, Springer, vol. 35(2), pages 201-221, April.
    5. Massiani, Jerome & Ragazzi, Giorgio, 2008. "Costs and efficiency of highway concessionaires: a survey of Italian operators," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 38, pages 85-106.
    6. Lei Zhang & David Levinson, 2004. "Pricing, Investment, and Network Equilibrium," Working Papers 000032, University of Minnesota: Nexus Research Group.
    7. Ozbay, Kaan & Bartin, Bekir & Yanmaz-Tuzel, Ozlem & Berechman, Joseph, 2007. "Alternative methods for estimating full marginal costs of highway transportation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(8), pages 768-786, October.
    8. Chester, Mikhail & Horvath, Arpad, 2008. "Environmental Life-cycle Assessment of Passenger Transportation: A Detailed Methodology for Energy, Greenhouse Gas and Criteria Pollutant Inventories of Automobiles, Buses, Light Rail, Heavy Rail and ," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt5670921q, Institute of Transportation Studies, UC Berkeley.

    More about this item

    JEL classification:

    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies


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