The Value of Travel Time Savings and the Link with Income: Implications for Public Project Evaluation

Abstract

This paper summarises the link between the value of travel time savings (VTTS) and income levels found in various empirical studies. Most studies find that VTTS increases with income but less than proportionately. A square root relationship with household income relative to mean incomes is suggested as a useful approximation, although no theoretical support is offered. Actual project evaluations generally ignore changes in VTTS with income, i.e., government agencies follow an equity principle and value time the same for all users. But this results in an asymmetric treatment of benefits and costs. Benefit-cost studies normally do not make an income adjustment for monetary benefits and costs, but ignoring the link between incomes and VTTS means agencies do implicitly make an income adjustment for time savings. This could distort project ranking depending on the relative importance of time versus monetary benefits and costs, and/or the mix of income- and timeconstrained travellers affected by the project.