Abstract

In Becker (1965) and neoclassical microeconomic theory the value of time is a constant fraction of the hourly wage. When taken to data, however, this value departs from theoretical predictions, and appears to vary with the amount of time saved. By observing drivers on freeways opting to enter toll lanes with high-frequency, time-varying prices that secure a minimum level-of-service, we uncover a new and fundamental aspect of preferences for travel time savings related to urgency. The presence of preferences for urgency, which reflect the fact that individuals often face discrete penalties for being late, allows us to reconcile the pattern observed in the data with neoclassical theory. Using a rich, repeated-transaction data and individual-level hedonic estimation, we show that the value of urgency accounts for 87 percent of total willingness-to-pay for time savings. As a result, ignoring the value of urgency in cost-benefit analysis severely underestimates the true value of time savings that projects deliver, as such omission will typically ignore non-trivial welfare gains to a potentially large number of individuals.


Original document

The different versions of the original document can be found in:

https://ideas.repec.org/p/nbr/nberwo/26956.html,
https://socionet.ru/publication.xml?h=repec:nbr:nberwo:26956,
http://m.nber.org/papers/w26956,
https://sociorepec.org/publication.xml?h=repec:nbr:nberwo:26956&l=en,
https://academic.microsoft.com/#/detail/3015569507
Back to Top

Document information

Published on 12/04/20
Accepted on 12/04/20
Submitted on 12/04/20

Volume 2020, 2020
DOI: 10.3386/w26956
Licence: CC BY-NC-SA license

Document Score

0

Views 10
Recommendations 0

Share this document

claim authorship

Are you one of the authors of this document?