Transport Welfare Benefits in the Presence of an Income Effect
Choice Modelling: The State-of-the-art and The State-of-practice
ISBN: 978-1-84950-772-1, eISBN: 978-1-84950-773-8
Publication date: 15 January 2010
Abstract
This paper presents new evidence that the error in estimating the economic welfare of a transport scheme can be very large. This is for two reasons. Firstly when cost changes are large the income effect can be significant. This means the change in consumer surplus is no longer a good estimate of the compensating variation — the true measure of welfare benefit. Secondly, in the presence of large cost changes estimating the change in consumer surplus using the Rule of Half can lead to large errors. The paper uses a novel approach based on stated choice and contingent valuation data to estimate the size of this error for the situation of the provision of fixed links to islands in the Outer Hebrides of Scotland.
Acknowledgements
Acknowledgements
The research presented in this paper is drawn from the author's PhD thesis at the University of Leeds. I am grateful to my supervisors Peter Mackie and Richard Batley for comments, support and advice during the research and preparation of this paper. I am also grateful to the EPSRC studentship that funded my studies and to Transport Scotland for funding the surveys. I am further grateful to the three anonymous referees who reviewed and commented on the paper. None of the above, however, is in any way responsible for the results described and views expressed in this paper.
Citation
Laird, J. (2010), "Transport Welfare Benefits in the Presence of an Income Effect", Hess, S. and Daly, A. (Ed.) Choice Modelling: The State-of-the-art and The State-of-practice, Emerald Group Publishing Limited, Leeds, pp. 397-420. https://doi.org/10.1108/9781849507738-018
Publisher
:Emerald Group Publishing Limited
Copyright © 2010 Emerald Group Publishing Limited