The spatial variation of travel time valuations: A general equilibrium model and application in project appraisal

Abstract

Current practices in transport policy appraisal are mostly restricted to partial equilibrium modelling, creating a natural need to explore new ways to understand the spatial general equilibrium impacts of transport interventions. The emerging literature of quantitative spatial models (QSM) offers new opportunities. However, the direct application of the QSM methodology in transport is hindered by the assumption of unidimensional ‘iceberg’ travel costs. Due to the presence of both temporal and pecuniary travel costs, the theoretical characterisation and empirical measurement of the monetary value of travel time savings has been a central theme of transport research for decades. We bridge a gap between spatial and transport economics by developing a quantitative spatial model with endogenous travel time valuations , revealing its previously neglected spatial heterogeneity. The model yields OD-specific values of time in spatial general equilibrium. Numerical implementation of the model highlights the relevance of our contribution in practical transport appraisal.