Unit Income Elasticity of the Value of Travel Time Savings
M Fosgerau, Danish Transport Research Institute, DK
The income elasticity of the VTTS is estimated. Results indicate an elasticity of 1 after accounting for income taxes, for the dependence of trip length on income and for the stochastic distribution of the VTTS using semiparametric methods.
The paper presents an analysis of the income elasticity of the value of travel time savings (VTTS). It expands on previous micro-econometric estimates of the VTTS on binary choice experimental data by accounting for income taxes, for the dependence of trip length on income and for the stochastic distribution of the VTTS using semiparametric methods. Previous empirical estimates of the elasticity are around 0.6 while in practice i.a. Denmark and the UK (until 2004) apply a unit income elasticity for forecasting the future VTTS in economic evaluations of transport projects. This discrepancy may be resolved as shown in the paper.
Association for European Transport