The selection of income measures in value of travel time models and their implications for the VTT, its cross-sectional income elasticity and transport appraisal

Abstract

This paper investigates the extent to which the selection of income variables during the estimation of choice models underlying national value of time (VTT) studies affects the cross-sectional income elasticity and the resulting VTT. Using data from the most recent GB (Great Britain) national VTT study, we focus on two contentious issues in relation to the income variable, namely taxation and within household budget allocation. Our work finds that accounting for the progressive nature of income tax and social benefits both increase the cross-sectional income elasticity. In the same vein, assumptions regarding the within-household budget allocation affect the cross-sectional income elasticity. Although the cross-sectional income elasticity is sensitive to the selected income variable, the impact on the nationally representative VTT is insignificant if the stated preference sample is representative with respect to the income variable. The observed discrepancies between the cross-sectional and the inter-temporal income elasticity of the VTT highlight that using these elasticities interchangeably influences the evaluation of future transport infrastructure decisions in terms of value for money.