the value of value pricing of roads second best pricing and product differentiation abstract some road pricing demonstrations use value pricing in which travelers can choose between a free but congested roadway and a priced roadway recent research has uncovered a potentially serious problem for such demonstrations second best tolls may be far lower than those typically charged and from a welfare perspective the latter may be worse than not pricing at all that research however assumes that all travelers are identical and it therefore neglects the benefits of product differentiation using a model with two user groups we find that accounting for heterogeneity in value of time is important in evaluating constrained policies and improves the relative performance of policies that offer differential prices

euro dollar real exchange rate dynamics in an estimated two country model an assessment abstract several theoretical contributions using two country models have combined alternative forms of pricing under nominal rigidities with different asset market structures to explain real exchange rate dynamics we estimate a two country model using data for the united states and the euro area and study the importance of such alternative assumptions in fitting the data a model with local currency pricing and incomplete markets does a good job in explaining real exchange rate volatility and fits the dynamics of domestic variables well the complete markets assumption delivers a similar fit only when the structure of shocks is rich enough

econometric issues in estimating consumer preferences from stated preference data a case study of the value of automobile travel time this paper explores a number of methodological issues related to the econometric analysis of stated preference data in the context of estimating the value of automobile travel time estimates of parameters and the willingness to pay wtp to save time are obtained using conventional ordered probit and rank ordered logit models and an innovation called mixed logit we find that the average wtp is low and does not exhibit much variation among motorists although our findings using data on respondents rankings of alternatives are robust we find that caution should be used in estimating stated preferences based on respondents ratings

stated preferences over job characteristics a panel study when making choices over jobs with different characteristics what trade offs are decision makers willing to make such a question is difficult to address using typical household surveys that provide a limited amount of information on the attributes of the jobs to address this question a small but growing number of studies have turned to the use of stated preference experiments but the extent to which stated choices by respondents reflect systematic trade offs across job characteristics remains an open question we use two popular types of experiments profile case best worst scaling and multi profile case best worst scaling to elicit job preferences of nursing students and junior nurses in australia each person participated in both types of experiments twice within a span of about 15 months using a novel joint likelihood approach that links a decision maker s preferences across the two types of experiments and over time we find that the decision makers make similar trade offs across job characteristics in both types of experiments and in both time periods except for the trade off between salary and other attributes the valuation of salary falls significantly over time relative to other job attributes for both types of experiments also within each period salary is less valued in the profile case compared to the more traditional multi profile case

using revealed preferences to estimate the value of travel time to recreation sites the opportunity value of travel time vtt is one of the most important elements of the total cost of recreation day trips and arguably the most difficult to estimate most studies build upon the theoretical framework proposed by becker 1965 by using a combination of revealed and stated preference data to estimate a value of time which is uniform in all activities and under all circumstances this restriction is relaxed by deserpa s 1971 model which allows the value of saving time to be activity specific we present the first analysis which uses actual driving choices between open access and toll roads to estimate a vtt specific for recreation trips thereby providing a value which conforms to both becker s and deserpa s theoretical models using these findings we conduct a monte carlo simulation to identify generalizable results for subsequent valuation studies our results indicate that 3 4 of the wage rate provides a reasonable approximation of the average vtt for recreation trips while the commonly implemented assumption of 1 3 of the wage rate generates downward biased results

value of time speeding behavior and gasoline prices abstract value of time vot is a key parameter in economics and policy this paper presents an alternative method to estimate vot by analyzing an hourly dataset on drivers speeding behavior as a function of the gasoline price our identification strategy is novel as it is based on the intensive margin in comparison previous studies reveal vot on the extensive margin but choice alternatives have multiple attributes thereby potentially confounding estimates consistent with the range of the prior literature we find a vot of about 50 of the wage rate and analyze sources of bias from accidents and traffic tickets these bias functions suggest that previous stated preference vot estimates are likely downward whereas previous revealed preference estimates are likely upward biased

the effect of residential location on retirement age theory and some evidence on male behaviour in the us retirement age choice is introduced into a conventional model of residential location to show that the retirement age of workers who do not move after retirement can be influenced by the urban variation of leisure and housing prices a retirement demand equation that incorporates commuting characteristics is estimated on a sample of us urban male owners interviewed by the panel study of income dynamics it is found that commuters retire around two years earlier than comparable home based workers although the evidence provides no support for this gap to be the result of differences in leisure or housing prices across both groups

traffic and crime abstract we study the link between crime and extreme traffic congestion to estimate the psychological costs of traffic our empirical analysis combines police incident reports with observations of local traffic data in los angeles from 2011 to 2015 this rich dataset allows us to link traffic with criminal activity at a fine spatial and temporal dimension our identification relies on deviations from normal traffic to isolate the impact of abnormally high traffic on crime we find that extreme traffic increases the incidence of domestic violence a crime shown to be affected by emotional cues but not other crimes the result is robust to a variety of specifications and falsification tests the results represent a lower bound of the psychological costs of traffic congestion since most drivers stuck in traffic do not commit domestic violence but still bear some emotional costs

contingent valuation a practical alternative when prices aren t available a person may be willing to make an economic tradeoff to assure that a wilderness area or scenic resource is protected even if neither that person nor perhaps anyone else will actually visit this area this tradeoff is commonly labeled passive use value contingent valuation studies ask questions that help to reveal the monetary tradeoff each person would make concerning the value of goods or services such surveys are a practical alternative approach for eliciting the value of public goods including those with passive use considerations first i discuss the exxon valdez oil spill of march 1989 focusing on why it is important to measure monetary tradeoffs for goods where passive use considerations loom large although discussions of contingent valuation often focus on whether the method is sufficiently reliable for use in assessing natural resource damages in lawsuits it is important to remember that most estimates from contingent valuation studies are used in benefit cost assessments not natural resource damage assessments those working on benefit cost analysis have long recognized that goods and impacts that cannot be quantified are valued implicitly by giving them a limitless value when government regulations preclude certain activities or giving them a value of zero by leaving certain consequences out of the analysis contingent valuation offers a practical alternative for reducing the use of either of these extreme choices i put forward an affirmative case for contingent valuation and address a number of the concerns that have arisen

when should drivers be encouraged to carpool in hov lanes policies to encourage carpooling in high occupancy vehicle hov lanes have been adopted in the united states to lower congestion and reduce air pollution we analytically model highway congestion and other vehicle related externalities encouraging carpooling decreases total costs when congestion relief in mainline lanes outweighs increased hov lane congestion importantly entry of new drivers via induced demand can negate the benefits of increased carpooling using 10 years of traffic data from los angeles we estimate time and route specific marginal external costs because costs vary substantially across routes hours and days current policies to promote carpooling will often increase social costs jel r41 r48 q53

social security national policies with international implications social security policies within individual countries are determined independently by national governments but the resulting outcome is inefficient compared with what would result from the international co ordination of policies this is because national social security policies produce international externalities via their effects on world interest rates an illustrative example suggests that the gains from co ordination are potentially significant virtually all countries operate social security or redistributive policies each chooses policies independently and to my knowledge no one either in a policymaking context or in the large literature on international policy co ordination has suggested that such decisions would benefit from international coordination 1 however a simple argument suggests that independent national social security policies are inefficient more specifically in the long run national governments make policy decisions which are too egalitarian this holds provided that social security lowers national saving in this case each national government faces a trade off between income redistribution and national saving and can be assumed to locate at the nationally optimal point on this trade off taking as given the world interest rate the latter is clearly not independent of the combined effect of all countries policies however if all countries expand social security the resulting fall in world saving will raise the world interest rate with adverse consequences for each national economy each country rationally ignores its own small contribution to the global outcome if this international externality were internalised by co ordination countries would relocate on the trade off between income redistribution and national saving demonstrating the existence of an externality says nothing about its quantitative significance i address this with an example which focuses on pay as you go payg retirement pensions in an economy with a mixture of forward looking and myopic individuals the pensions prevent destitution among retired myopes and thus effectively redistribute life time welfare but they also lower saving because of payg financing for all parameter values considered international co ordination of pensions policy decisions generates welfare gains which are larger for many parameter values substantially larger than recent estimates of the welfare gains from either the entire elimination of all cyclical fluctuations or the reduction of inflation and nominal interest rates from suboptimally high to optimal levels hence the issues addressed in the paper are quantitatively significant when judged against other frequently advocated i am grateful to two anonymous referees for helpful comments on earlier versions they are not responsible for the present version

the trade off between money and travel time a test of the theory of reference dependent preferences we formulate a model of reference dependent preferences based on the marginal rate of substitution at the reference point of a reference free utility function using binary choices on the trade off between money and travel time reference dependence is captured by value functions that are centered at the reference the model predicts a directly testable relationship among four commonly used valuation measures willingness to pay wtp willingness to accept wta equivalent gain eg and equivalent loss el moreover we show that the model allows recovering the underlying reference free value of time based on a large survey data set we estimate an econometric version of the model allowing for both observed and unobserved heterogeneity in a series of tests of high statistical power we find that the relationship among the four valuation measures conforms to our model and that the constraints on the parameters implied by the model are met the gap between wtp and wta is found to be a factor of four loss aversion plays an important role in explaining responses moreover participants are more loss averse in the time dimension than the cost dimension we further find evidence of asymmetrically diminishing sensitivity finally we show that the fraction of mistakes in the sense that participants are observed to sometimes select dominated options varies systematically in a way consistent with the model of reference dependence the results of the paper have important implications for the evaluation of infrastructure investment and pricing reforms in the transport sector

winning or losing from dynamic bottleneck congestion pricing the distributional effects of road pricing with heterogeneity in values of time and schedule delay abstract this paper analyses the efficiency and distributional impacts of congestion pricing in vickrey s 1969 dynamic bottleneck model of congestion allowing for continuous distributions of values of time and schedule delay we find that congestion pricing can leave a majority of travellers better off even without returning the toll revenues to them we also find that the consumer surplus losses or gains from tolling are not strictly monotonic in the value of time because they also depend on the value of schedule delays the greatest losses are not incurred by drivers with the lowest value of time but by users with an intermediate value of schedule delays and the lowest value of time for that value of schedule delays for second best pricing with an untolled alternative the pattern of distributional effects is quite similar to that for first best pricing in contrast with results from prior static models users who are indifferent between the two alternative routes are not the ones who gain least from this type of second best pricing our results suggest that in assessing the distributional impacts of road congestion pricing it is important to take into account both the distribution of the value of time and of the value of schedule delays as well as the dynamics of departure time choice

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

carpooling and driver responses to fuel price changes evidence from traffic flows in los angeles abstract we examine carpooling and driver responses to fuel price changes using a simple theoretical model we show that traffic flows in mainline lanes unambiguously decrease when fuel prices increase and this effect is stronger when the presence of a carpool lane provides a substitute to driving alone in contrast in carpool hov lanes flow can either increase or decrease these predictions are tested using 8 years of traffic flow data for 1700 locations in los angeles in our preferred specification the mean elasticity of flow with respect to fuel price is 0 136 for hov lanes for a 10 increase in fuel price this implies 10 additional carpools per hour 8 8 million per year in additional congestion costs for carpoolers and 11 3 million lower costs for mainline drivers for mainline lanes flow elasticities are 0 083 and 0 050 for highways with and without an hov lane these estimates imply that the mean highway with an hov lane experiences a 30 larger decrease in hourly flow compared to the mean highway without an hov lane flows in hov lanes show an immediate decrease following a price increase but respond positively to price increases over time which suggests time is an important input to carpool formation

learning and fatigue effects revisited investigating the effects of accounting for unobservable preference and scale heterogeneity using multiple choice tasks per respondent in discrete choice experiment studies increases the amount of available information however respondents learning and fatigue may lead to changes in observed utility function preference taste parameters as well as the variance in its error term scale they need to be controlled to avoid potential bias a sizable body of empirical research offers mixed evidence in terms of whether these ordering effects are observed we point to a significant component in explaining these differences we show how accounting for unobservable preference and scale heterogeneity can influence the magnitude of observed ordering effects

uncovering the distribution of motorists preferences for travel time and reliability we apply recent econometric advances to study the distribution of commuters preferences for speedy and reliable highway travel our analysis applies mixed logit to combined revealed and stated preference data on commuter choices of whether to pay a toll for congestion free express travel we find that motorists exhibit high values of travel time and reliability and substantial heterogeneity in those values we suggest that road pricing policies designed to cater to such varying preferences can improve efficiency and reduce the disparity of welfare impacts compared with recent pricing experiments

what is the optimal speed limit on freeways abstract when choosing his speed a driver faces a trade off between private benefits time savings and private costs fuel cost and own damage and injury driving faster also has external costs pollution adverse health impacts and injury to other drivers this paper uses large scale speed limit increases in the western united states in 1987 and 1996 to address three related questions first do the social benefits of raising speed limits exceed the social costs second do the private benefits of driving faster exceed the private costs third what is the optimal speed limit i find that a 10 mph speed limit increase on highways leads to a 3 4 mph increase in travel speed 9 15 more accidents 34 60 more fatal accidents and elevated pollutant concentrations of 14 24 carbon monoxide 8 15 nitrogen oxides 1 11 ozone and 9 higher fetal death rates around the affected freeways using these estimates i find that the social costs of speed limit increases are two to seven times larger than the social benefits in contrast many individual drivers would enjoy a net private benefit from driving faster privately a value of a statistical life vsl of 6 0 million or less justifies driving faster but the social planner s vsl could be at most 0 9 2 0 million to justify higher speed limits i conclude that the optimal speed limit was lower but not much lower than 55 mph

identifying demand parameters in the presence of unobservables a combined revealed and stated preference approach we develop a combined revealed and stated preference approach to identify discrete choice demand parameters in the presence of unobserved determinants of choice our approach overcomes difficulties associated with small choice sets multicollinearity and endogeneity that arise with revealed preference approaches to illustrate our framework we revisit two canadian moose hunting datasets our empirical results suggest the potential gains from fusing revealed and stated preference data but they also suggest its limitations when the data generating processes for the data sources differ

wages and commuting quasi natural experiments evidence from firms that relocate we examine individual level compensating differentials for commuting distance in a quasi natural experiment setting by examining how wages respond to changes in commuting distance induced by firm relocations this set up enables us to test for the relevance of job search frictions within labour market models due to the quasi experimental set up we are able to avoid a range of endogeneity issues we demonstrate that a 1 km increase in commuting distance induces an almost negligible wage increase in the year after the relocation but a more substantial wage increase of about 0 15 three years later 2013 royal economic society

the state of the art of environmental valuation with discrete choice experiments abstract this paper provides with a review of the state of the art of environmental valuation with discrete choice experiments dces the growing body of literature on this field serves to emphasize the increasing role that dces are playing in environmental decision making in the last decade the paper attempts to cover the full process of undertaking a choice experiment including survey and experimental design econometric analysis of choice data and welfare analysis the research on this field is found to be intense although many challenges are put forward e g choice task complexity and cognitive effort experimental design preference and scale heterogeneity endogeneity or model uncertainty reviewing the state of the art of dces serves to draw attention to the main challenges that this methodological approach will need to overcome in the coming years and to identify the frontiers in discrete choice analysis

the value of automobile travel time implications for congestion policy abstract public policy has remained stoutly resistant to the economic profession s call to use congestion tolls to minimize the social costs from automobile congestion this paper explores this issue by using stated preference models to estimate the value that commuters are willing to pay to save travel time we find that this value is low and surprisingly insensitive to travel conditions and how toll revenues are used it appears that even high income commuters having adjusted to congestion through their modal residential workplace and departure time choices simply do not value travel time savings enough to benefit substantially from tolls

pareto improvements from lexus lanes the effects of pricing a portion of the lanes on congested highways abstract though economists have long advocated road pricing as an efficiency enhancing solution to traffic congestion it has rarely been implemented primarily because it is thought to create losers as well as winners this paper shows that a judiciously designed toll applied to a portion of the lanes of a highway can generate a pareto improvement before using the revenue a sufficient condition being that drivers with a high value of time travel at the peak of rush hour i obtain these new theoretical results by extending a standard dynamic congestion model to reflect an important additional traffic externality extra traffic does not simply increase travel times but also introduces frictions that reduce throughput the analysis draws attention to a practical policy that may help overcome the widespread opposition to road pricing

cities in bad shape urban geometry in india the spatial layout of cities is an important feature of urban form highlighted by urban planners but overlooked by economists this paper investigates the causal economic implications of city shape in india i measure cities geometric properties over time using satellite imagery and historical maps i develop an instrument for urban shape based on geographic obstacles encountered by expanding cities compact city shape is associated with faster population growth and households display positive willingness to pay for more compact layouts transit accessibility is an important channel land use regulations can contribute to deteriorating city shape

rear view mirror driving in defined contribution systems the strange formula of the chilean pension funds the pioneering regulation on chilean pension funds under defined contribution program requires private managing institutions to exclusively manage individual accounts and meet a minimum return to their clients the purpose of this study is to empirically investigate the investment behaviour of pension funds and to contribute to the social security debate the findings reveal the benchmark significantly explains funds performance pension funds tend to replicate their asset allocations to exhibit similarities in returns we believe the obligation on fund managers to attain a minimum guaranteed return based on relative performance evaluation encourages them not to deviate from the industry s performance indeed the benchmark explains most of the group performance to hold similar allocations managers may monitor each others through their investment style

white knuckle externalities i introduction urban motorists are well acquainted with the frustrations of traffic congestion as calfee and winston 1998 put it everyone knows the toll congestion can take on drivers nerves and everyone knows how costly it can be in terms of wasted time and lost productivity this statement illustrates two distinct externalities that are generated during a typical rush hour commute first congested travel is simply unpleasant 1 second congested travel means delayed travel economists have devoted considerable attention to estimating travel delay externalities and the marginal value of travel time savings often referred to as the value of time vot typically dominates the estimation of highway improvement benefits small 1992 the sheer unpleasantness of congestion however has received little attention presumably because it is difficult to quantify or even observe yet it may represent a substantial portion of the wedge between the social and the private costs of highway travel for example consider this familiar scenario a ball game or concert lets out spectators flock to their vehicles and parking lot gridlock ensues several motorists decide to stay put turn on the radio and wait it out for these motorists the cost of delayed travel is dominated by another distinct cost one that is difficult to observe but is certainly palpable for rush hour commuters schedule delay costs are too large for most motorists to wait it out and this additional congestion cost must be incurred there is no conventional label for such costs so the term white knuckle costs is introduced here to describe them 2 the existence of white knuckle costs helps to explain a recurring finding that the value of time increases with the severity of congestion hensher 2001 small et al 1999 wardman 2001 for instance wardman s 2001 meta analysis of several vot studies finds that time spent in congested traffic is valued 48 more highly than time spent in free flowing conditions suggesting that more difficult driving conditions linked with greater stress frustration and perhaps travel time uncertainty lead to higher time valuations the finding provides an initial gauge on the size of these white knuckle costs and suggests that traditional vot estimates may reflect them to some extent how successfully these vot estimates capture white knuckle costs however depends on the degree to which they are correlated with travel delay costs unfortunately in such studies no precise method has been offered for disentangling travel delay and white knuckle influences as such there has been no way to determine how closely vot estimates approximate the value of both reduced travel time and relief from other knuckle whitening factors moreover separate estimates would allow for a more thorough understanding of how the stress and frustration of congestion compare to the travel delays it causes this paper exploits a unique set of toll road data to obtain separate estimates for travel delay and white knuckle costs so that their magnitudes can be compared this is accomplished by analyzing the real world trade offs that rush hour commuters make between congested travel and uncongested travel for a fee holding constant the influence of travel times on this choice 3 the basic idea is that both travel times and unobservable influences such as stress and frustration naturally increase with congestion by simultaneously estimating the influences of congestion and travel time on route choice the resulting value of reduced congestion is purified of travel time influences thus revealing the value of nontime factors that cause white knuckles likewise the value of time is purified of white knuckle influences revealing the pure opportunity cost of motorists time applying these valuations to a suitable travel cost framework yields separate estimates of travel delay externalities and white knuckle externalities where the latter measures the unobservable externalities that motorists generate during congested travel

subsidies for intracity and intercity commuting this paper analyzes subsidies for intracity and intercity commuting in an urban economics framework with two cities and agglomeration externalities where workers may commute within and between cities first commuting subsidies serve to internalize agglomeration externalities intracity commuting subsidies give incentives to move to the larger city and intercity commuting subsidies make residents of the periphery commute to the core second if agglomeration rents are locally captured commuting subsidies act as a welfare enhancing transfer from the core to the periphery