Inter-temporal variations in the value of time

Abstract

INTRODUCTION The objective of the research reported here is to examine how the value of time varies over time. A key factor in inter-temporal variations in the value of time is expected to be the impact of income growth, although changes in other socio-economic, demographic, attitudinal, employment and travel characteristics could also lead to variations in the value of time over time. The most widely held convention relating to the adjustment of recommended values of time over time is that they should be linked proportionately to growth in some measure of income. No consideration is given to possible changes in the value of time for other reasons. Even disregarding the latter issue, there is no reason from a theoretical standpoint why the income elasticity for private travel should be unity since it is a matter of personal preference how an individual or household allocates additional income to time savings. In contrast, the case for a close link between the value of time and income is much stronger for business travel. Official recommendations in Britain, as elsewhere, increase the value of non-work travel time over time in line with growth in income. DETR’s Transport Economics Note specifies that both work and non-work time values should be increased in line with real GDP per head. Beesley (1971) pointed out various sources of variation in the value of time over time and, on the basis of the uncertainty as to even the direction in which the values might vary, he argued for in favour of a zero trend value. The first British national value of time study (MVA et al., 1987) claimed that a constant real value of time was on theoretical grounds “equally logical and defensible” as the convention of linking the value of time to income growth. However, it was recognised that there did seem to have been an increase in the value of time over time. It was concluded that, “We do not feel able, therefore, in the absence of any specific work on this topic within our programme, and given the existence of plausible arguments in contrary directions, to come to any firm conclusions. The matter must remain on the agenda for further investigation”. A large amount of recent evidence, which we shall cover, is being taken to indicate that the income elasticity for the value of time spent in private travel is far less than unity. It is important that such a challenge to the widely used convention is tested against the widest body of evidence possible before any conclusions are drawn, particularly given the implications of amended recommendations for practical project evaluations. The aim of this paper is to review the existing evidence relevant to inter-temporal variations in the value of time and to present some fresh empirical evidence. The approach adopted here is threefold. Firstly, we examine the cross-sectional variations in the value of time with income apparent from a number of empirical studies, both British and from other countries, and we develop a model to explain cross-sectional income elasticities across British studies. Secondly, the opportunity exists of analysing two data sets obtained from the same SP design conducted in the same area but at different points in time. Finally, variations in values of time over time are analysed by means of ‘meta-analysis’ of a large data set of British empirical evidence. The structure of this report is as follows. Section 2 contains a discussion of various background issues relating to theoretical maters, methodology and previous findings. Section 3 reports analysis of cross-sectional variations in values of time with income whilst section 4 reports on joint analysis of two data sets collected in the first and second national value of time studies commissioned by the Department of Transport. Section 5 reports the findings of our meta-analysis of a large body of British evidence on the value of time. A discussion of the various findings is provided in section 6 and concluding remarks are provided in section 7. The final stage of the study will draw together this evidence to form recommendations concerning the value of time over time