Time-Use Approach for Estimating Commuters’ Value of Travel Time

Urban workers face a multitude of commute options. In order to accurately predict how workers will select between travel options and assess benefits that accrue from transportation improvements, one needs to account for cross-sectional variation in individuals’ value of travel time. This paper provides structural estimates of the distribution of values of travel time for full-time employed urban commuters using data from the 2003 and 2004 waves of the American Time Use Survey. The underlying theoretical model assumes that individuals balance forgone wage income against leisure utility when deciding how much time to spend working each day. Time spent commuting also reduces leisure utility but may be weighted differently than work time. The theoretical model provides a framework for identifying individuals’ value of travel time through estimation of a labor supply function which includes wages, commute time, and demographics as explanatory variables. The mean and standard deviation of the marginal value of travel time is estimated at $5.38 and $2.85 per hour respectively for full-time urban workers. The paper concludes by estimating the expected impact of increasing commute times on productivity, income, and welfare for full-time urban workers.