Handbook of Research Methods and Applications in Transport Economics and Policy

Handbook of Research Methods and Applications in Transport Economics and Policy

Handbooks of Research Methods and Applications series

Edited by Chris Nash

Transport economics and policy analysis is a field which has seen major advances in methodology in recent decades, covering issues such as estimating cost functions, modelling of demand, dealing with externalities, examining industry ownership and structure, pricing and investment decisions and measuring economic impacts. This Handbook contains reviews of all these methods, with an emphasis on practical applications, commissioned from an international cast of experts in the field.

Chapter 5: Valuing transport externalities

Luis I. Rizzi and Juan de Dios Ortúzar

Subjects: economics and finance, transport, environment, research methods in the environment, transport, research methods, research methods in economics, research methods in the environment, urban and regional studies, research methods in urban and regional studies, transport


Transport activities produce several by-products which may have unintended consequences. These externalities tend to contribute negatively to our quality of life so they need to be restricted somehow. Examples of these are congestion, accidents, air pollution, noise and spatial segregation. This chapter is mainly concerned with the valuation of these negative external effects in a way that makes economic sense, such that those valuations can be used as inputs in designing more sustainable environmental policies. This chapter comprises three sections. The first explains the basic theory of environmental externalities, showing that if these are not adequately priced, transport negative by-products will be overproduced. This section also describes the most relevant transport externalities. The second section is concerned with data collection methods and a few techniques designed to estimate the marginal external costs of externalities. Data collection can be of revealed preference (RP) or stated preference (SP) in nature. In the former, the data registers actual behaviour of respondents, while in the latter individual responses to hypothetical choices is recorded. The methodological techniques that will be described – discrete choice models and hedonic pricing – are based on the idea of describing a good according to its hedonic attributes. Finally, the third section contains some case studies illustrating applications of data collection methods and estimation techniques.

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