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Issues to Consider

This section lists several issues that should be considered when selecting appropriate values for travel time savings.
 

Regional Differences in Wage Rates

While much of the research literature has shown a general relationship between traveler valuation of time and prevailing wage rates, care must be taken to avoid having a single study that uses different time values for different communities or regions within its study area. Otherwise, studies would conclude that transportation improvements should be focused on richer areas rather than poorer areas, since the richer areas yield a higher overall value for the same magnitude of time savings.

Intercity vs. Local Trips

The trip purpose can play a significant role in a traveler's value of time. A distinction can be made between intercity trips and local trips, with intercity travel typically involving a higher time value because it usually occurs in conjunction with expensive services such as hotel stays, restaurant meals, and entertainment. Therefore, time saved during intercity travel can be used for purposes that travelers value highly, so it is typically set at a higher value than local trips (70% versus 50% of the wage rate by the US DOT (1997). However, it is often difficult to estimate the proportion of intercity versus local traffic, so for most benefit-cost analyses, a single value of time is used for both types of trips.

Small Travel Time Savings vs. Large Travel Time Savings

Some studies suggest that small increments of time have lower unit values than do larger increments of time. The reasoning behind this is that small travel time savings might not be used effectively and might not even be noticed by travelers (Booz Allen & Hamilton 1999). Evidence shows that drivers are often wrong in their estimates of their travel time, thereby making small travel time savings seem to have no value.

The counter-argument is that even if travelers do not accurately estimate their travel times or notice travel time savings, they still find uses for the saved time, especially if the time savings are consistent. In addition, the cumulative effects of a series of transportation improvements should be noted. Multiple improvements along a corridor over time might have a significant effect on travel time despite small incremental savings from each one. Therefore, the same unit value of travel time savings is typically used for both small and large travel time savings.

Passenger vs. Driver Time

Some researchers believe that a lower value of time should be used for passenger time savings than for driver time savings. The reasoning behind this is that the driver has the added disutility of the stress of driving. Therefore, time savings would be valued more highly by the driver than the passenger. However, there is disagreement on this issue in the literature. The extent of the differences in values of time for drivers and passengers is currently not well established. Therefore, it is recommended that attempts to account for these differences should be postponed until they are better understood.

Travel Time as a Benefit Rather than a Dis-benefit

When calculating the value of travel time savings, researchers and practitioners commonly assume that travel is a derived demand (based on given origin and destination patterns) and that travel time is what economists refer to as a "disutility" (something that people desire to minimize). However, there may be times when a person would rather be traveling than engaged in other activities (for example, a pleasant drive on a country road). In this case, travel time may be treated as a utility by the traveler.

Travel time also becomes a benefit when transportation improvements improve mobility (i.e., ability of more residents to use transportation to access more destinations) or expand accessibility (i.e, ability to reach more job opportunities, have access to a larger workforce, or go to shopping, social, or recreational destinations within a given travel time). In such cases, people may gladly make use of transportation improvements to travel to more distant destinations that are attractive to them.

Even a typical commute trip may have an intrinsic component and a derived component of utility. In one study of more than 1900 residents of the San Francisco Bay Area, the average one-way ideal commute time was found to be 16 minutes (Mokhtarian and Salomon 2001). Three-quarters of this sample reported that they sometimes or often travel "just for the fun of it." This implies that given the opportunity, travelers may not wish to minimize their travel time to zero. Studies such as this raise important questions about our assumptions regarding individuals and their travel behavior. Understanding of this subject is still very limited, but a better understanding of travel time may have important implications for evaluating the benefits of travel time savings.

Value of Time Depends on Types of Transportation Models Used

Many studies have been conducted to determine travelers' value of time. Because there is no market for buying and selling time, indirect methods must be used to assign time a monetary value. These methods all involve viewing how people make trade-offs between travel time and costs in their decision-making. These trade-offs can be observed from choices people make in selecting among modes of travel, routes of travel, time of travel, and choice of where they live. Since these different types of decisions vary widely in their long-term and short-term implications, it is difficult to isolate time savings from other factors that drivers consider.

It is also important to note that travel time benefits are generally based on the number of trips and time saved per trip, assuming fixed origin-destination patterns. As a result, time savings benefits are easily calculated for transportation capacity improvements that enhance level of service for existing, heavily-traveled routes. However, benefits of projects that improve accessibility to alternative destinations and routes generally show up with lower benefit values, since there is less current use of these alternatives. Some researchers believe this has the effect of skewing benefit-cost studies to favor enlargement of capacity along existing routes rather than providing alternative destinations, routes, and modes.

Sources

Booz-Allen & Hamilton Inc. California Life-Cycle Benefit/Cost Analysis Model (Cal-B/C)-Technical Supplement to User's Guide. California Department of Transportation. September 1999b. Available at: http://www.dot.ca.gov/hq/tpp/planning_tools/tech_supp.pdf

Mokhtarian, P., and I. Salomon, "How Derived is the Demand for Travel? Some Conceptual and Measurement Considerations" Transportation Research A, Vol. 35, No. 8, September 2001, pp. 695-719. Available at: http://repositories.cdlib.org/itsdavis/UCD-ITS-REP-01-15/

U.S. Department of Transportation. "Departmental Guidance for the Valuation of Travel Time in Economic Analysis", Office of the Secretary of Transportation, U.S. Department of Transportation, 1997. Available at: http://ostpxweb.dot.gov/policy/Data/VOT97guid.pdf

U.S. Department of Transportation. "Revised Departmental Guidance: Valuation of Travel Time in Economic Analysis", Office of the Secretary of Transportation, U.S. Department of Transportation, 2003. Available at: http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf

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