Andrea Mattia (University of Chicago)
7 February 2023 @ 12:00 - 13:15
The Value of Time: Evidence from Traffic Congestion and Express Lanes
Abstract. The value of time (VOT) determines the allocation of non-labor time to tasks and is crucial in travel demand and infrastructure, where congestion is a major source of loss. A large literature has estimated the mean VOT over a variety of subpopulations, but commuting choices and welfare effects of congestion policies depend on the individual VOT of the policy-relevant population. In this paper, I estimate the full VOT distribution for a population of drivers, using a rich new dataset in the unique context of highway Express Lanes (ELs), which offer time savings in exchange for a toll. A continuous function of traffic density sets the toll and rounds it to the nearest $0.25, creating 32 separate discontinuities which provide identifying variation. The analysis is divided into three parts. First, using an RDD, I show that EL drivers have a mean VOT of $66.56 per hour saved, substantially exceeding estimates from the literature. Second, the full VOT distribution for all drivers, which rationalizes EL aggregate traffic shares and RD results, shows wide heterogeneity: the median is $17.42 per hour and the 95th percentile is $166.05. Third, I build a structural model that endogenizes departure time (a key form of adjustment) to assess the welfare consequences of a range of counterfactual policies. I find that the EL is welfare-reducing because the value of the increase in travel times for non-users outweighs the benefits for users by $25.68 per year, more than what half of drivers spend on the EL in a year.