Valuing Transport External Effects



Valuing Transport External Effects

Authors

ORTUZAR J de D, Pontificia Universidad CatQlica de Chile, Chile

Description

In many developed countries willingness-to-pay (WTP) methods have been used for the monetary valuation of a wide range of external effects of road traffic and, in particular, congestion, pollution, noise, and amenity loss. The thrust of this research has

Abstract

In many developed countries willingness-to-pay (WTP) methods have been used for the monetary valuation of a wide range of external effects of road traffic and, in particular, congestion, pollution, noise, and amenity loss. The thrust of this research has been to establish the full social costs of road transport both as a basis for efficient pricing in the transport sector and to extend the scope of social cost benefit analysis. There is considerable force in the argument that monetary expressions may well ensure that externalities are not understated in project evaluation. This is particularly important in the contexts of road investment appraisal and resource allocation for accident counter-measures and pollution control strategies. In the last 20 years the attribution of monetary values to accidents of different severity has been an important stimulus to increasing the resources towards road safety and establishing priorities over different safety measures. The main motivation for this work is to consider the potential for extending the scope and quality of such methods in a middle income developing country with a large potential for traffic growth and where road accidents and pollution derived from traffic are already severe.

One approach that has been frequently applied in practice is the transfer of US or European unit values to developing countries using, for example, GDP as a scale (see OECD, 1994a; ECMT, 1998). However, we know from work on the value of time that transferability to different cultural settings is suspect and justifies implementing local studies. Here we wish to contribute to the study of the transferability of WTP methods to less developed countries for evaluating selected transport externalities.

This paper addresses two objectives that are closely related to the terms of reference of a current research project': to examine recent developments in WTP methods and their applicability to less developed countries; to report on two pilot studies in which WTP (contingent valuation and stated preference) methods have been applied to accident and pollution related mortality risk valuation in Chile.

To our knowledge these are the first applications of expressed preference methods to address the costing of transport externalities in less developed countries although, as we shall describe, these draw heavily on state-of-the-art developments in international research.

In fact, Chile exhibits a number of features of both developed and developing market economies. It does not have a highly skewed population structure, nor does it suffer from severe unemployment (the current rate, under a heavy recession, is under 10%). Chile is also endowed with mature institutions, good educational infrastructure, and technically competent public servants who have long experience of social cost benefit analysis in project appraisal. On the other hand, car ownership in its capital, Santiago, is currently at 0.14 per head, and car use is growing rapidly at 6% per annum. The primary network outside Santiago is still under development and the scope for infrastructure investment is considerable. Also, and in common with many other middle income countries, road traffic accidents and pollution are very significant problems. Indeed, the climate, geographical disposition and topography of Santiago makes it susceptible to the build up and local concentration of pollutants. In the winter months of May and June the concentration of particulate matter is among the highest in the world with well-documented health effects (Eskeland, 1994; Cifuentes, 1998). Finally, as Chile has successfully implemented and officially supported value of time research, we feel it is an appropriate test bed for the application of WTP methods for other external effects.

The paper is structured as follows. In section 2 we introduce the concept of value ofa statistical life from a microeconomic point of view. In section 3 we describe and discuss a contingent valuation (CV) study of WTP for reductions in mortality risk, and in section 4 a stated preference (SP) study of road accident risk. In section 5 we draw some provisional conclusions as all our results are based on pilot studies that lack the degree of randomness to be generalised. However, they are instructive in many senses as we will discuss below.

Publisher

Association for European Transport