THE VALUE OF TIME IN ECONOMIC EVALUATION OF TRANSPORT PROJECTS: LESSONS FROM RECENT RESEARCH

There are currently no general guidelines for the valuation of time, which is thus often omitted in the economic evaluation of World Bank transport projects. This note reviews some recent research, and suggests an appropriate approach where standard values of time (VOTs) are not available from government sources. The conceptual model underlying the valuation of travel time savings aims to maximise consumer welfare, and postulates that each individual maximises the satisfaction or utility obtained by consuming and by engaging in leisure activities. This consumption and these activities are constrained in two important ways. Expenditure is limited by income, which must be earned by devoting time to working. Work, leisure activities, and travel compete for an amount of available time less than 24 hours per day. In allocating time between activities, an individual must trade extra consumption earned by work against less leisure, but can also extend available working and/or leisure time by spending more money to reduce travel time. This conceptual framework provides important insights into the nature of VOT savings. The note considers journey length, small time savings, gains and losses, walking and waiting time, distribution of time values in relation to mode-specific values, and freight traffic time saving. For the covering abstract, see IRRD E100587.