A Handbook of Transport Economics
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A Handbook of Transport Economics

Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman

Bringing together insights and perspectives from close to 70 of the world’s leading experts in the field, this timely Handbook provides an up-to-date guide to the most recent and state-of-the-art advances in transport economics. The comprehensive coverage includes topics such as the relationship between transport and the spatial economy, recent advances in travel demand analysis, the external costs of transport, investment appraisal, pricing, equity issues, competition and regulation, the role of public–private partnerships and the development of policy in local bus services, rail, air and maritime transport.
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Chapter 19: The Full Marginal Costs of Highway Travel: Methods and Empirical Estimation for North America

Yossi Berechman, Bekir Bartin, Ozlem Yanmaz-Tuzel and Kaan Ozbay


Yossi Berechman, Bekir Bartin, Ozlem Yanmaz-Tuzel and Kaan Ozbay INTRODUCTION Sound transportation policy making requires the correct estimation of the Full Marginal Costs (FMC) of highway travel. This information is essential for allocating resources efficiently, for ensuring equity among users and for developing effective pricing mechanisms. FMC is defined as the overall costs incurred by society from servicing an additional unit of transportation output (for example, car traffic). It is composed of direct costs to users and indirect costs to society (non-internalized externalities).1 Thus, the main objectives of this chapter are, first, to analytically examine the key components of FMC; subsequently, to empirically estimate these variables using pertinent case-study data from North America (the Northern New Jersey highway network) at the origin– destination (O–D) spatial level. A critical issue in transportation cost analysis is the definition of output. One approach is to distinguish between intermediate and final outputs, depending on the purpose of the analysis (Berechman and Giuliano, 1984). Intermediate outputs such as vehicle-miles, vehicle-hours or distance-traveled, are adequate for the evaluation of the technical efficiency of a transportation system. Final outputs, such as the number of trips or number of passengers, on the other hand, are most appropriate for analyzing the overall effectiveness of the system. It has been argued that models, which use intermediate outputs (for example, distance-traveled) may be inapt for analyzing users’ and social costs of transportation (for example, Jara-Diaz et al., 1992). Moreover, the use of such output variables may be inadequate for...

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