University of Oulu

Economic analysis of travelling : studies on travel behaviour in Finland

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Author: Pekkarinen, Saara1
Organizations: 1University of Oulu, Faculty of Economics and Business Administration, Department of Economics
Format: ebook
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1.4 MB)
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Language: English
Published: 2005
Publish Date: 2005-12-09
Thesis type: Doctoral Dissertation
Defence Note: Academic Dissertation to be presented with the assent of the Faculty of Economics and Business Administration, University of Oulu, for public discussion in Auditorium TA105, Linnanmaa, on December 19th, 2005, at 12 noon
Reviewer: Professor Kurt Brännäs
Professor Pia Koskenoja


A great deal of research in transportation economics has been motivated by the need to solve traffic congestion problems and to diminish negative environmental effects of road transport. The question, whether the economic measures are efficient, motivates this dissertation on the value of travel time, the rules of optimal pricing and the demands for public transportation and private car use.

Three concepts of the marginal value of travel time (MVT) are specified in this thesis. The first concept involves only the direct disutility of the travel time to work in addition to the utility of market goods and leisure. The second concept also includes the disutility from the time spent at work. The third concept furthermore takes into account the effect of the length of working hours, travel time, cost and income. The length of travel time, gender, family structure and flexibility of working hours have different effects on empirical MVTs, but travel costs and income affect them in a similar fashion.

The pricing decisions of the firms providing bus services are analysed with and without public subsidies. The consumption externality, i.e. the quantity demanded by other users, affects the individual bus demand. The results indicate that under uniform pricing, a socially optimal subsidy equals the increase in consumer’s surplus minus the fare revenue lost from current users due to lower fare. Under nonlinear pricing, the optimal pricing can be achieved when the regulator sets the subsidy so that it is inversely proportional to the network elasticity. The welfare loss due to increasing tax burden and the opportunity cost of providing cash fare service is also taken into account in the optimal pricing rule.

A model of bus demand with asymmetric information on the characteristics of bus users is developed. The model allows for habit formation and network effects. The latter effect is due to the positive influence of the aggregate demand for Regional Bus Cards (RBC) on an individual’s own demand. The empirical results indicate that in RBC services positive network effects are present and the elasticity of network size is less than one, which implies that the regional bus card is an impure public good. The own price elasticity of RBC in the short run is within the range of -0.3 and -1.1. The demand for RBC cards is more elastic than demand for RBC trips or passenger kilometres. The estimated price elasticity of urban bus demand is in line with that of RBC. A reasonably high cross-price elasticity of RBC trips and the ticket of 40 trips but a lower reverse elasticity were found.

A weakly separable demand for car mileage from car ownership and labour supply was rejected as was the exogeneity of car ownership in the mileage model. Therefore, the price elasticity of car mileage with respect to fuel price was estimated from the two equation model of car mileage with endogenous car ownership. The estimated parameters of the Tobit model are consistent but slightly higher than those estimated from the least squares. The fuel price elasticity varies from -0.2 to -0.9 with exogenous and endogenous car ownership, respectively.

The findings of this study can be applied in the analysis and implementation of different pricing and subsidy schemes for public transportation, as well as in the evaluation of the effectiveness of economic instruments for managing the growth of private car use.

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Series: Acta Universitatis Ouluensis. G, Oeconomica
ISSN-E: 1796-2269
ISBN: 951-42-7955-7
ISBN Print: 951-42-7954-9
Issue: 21
Copyright information: © University of Oulu, 2005. This publication is copyrighted. You may download, display and print it for your own personal use. Commercial use is prohibited.