Benefits of travel time savings for freight transportation : beyond the costs

European Regional Science Association ___________________________________________________ August, 2003

service production costs or the so called "factor cost method". In this article we will
investigate whether such practice is not omitting part of the benefits from transportation
time reductions, those benefits that shippers place on faster delivery. This possible
omission has already been questioned in recent transport economic literature (see for
instance Wigan et al (98)), by government agencies (see for instance Boiteux (01)) or by
international organisations like the World Bank.

We propose here to investigate this question in the framework of surplus analysis.
We also make a point here that the question of shippers valuation of time savings is not
the same question as the recurrent debate on indirect effects. Although it is not always
clear how direct and indirect effects are defined, we usually find that indirect effects of
infrastructure investments, are the one that do not appear in the changes of the quantity
of good transported on this precise market. We should however recognise that the
concept of indirect effects is not defined univocally, which makes it difficult sometimes
to define that such or such effect is or is not part of indirect effect. However if we
simply define indirect effects as the effects that are not reflected in the position of
transport supply and demand curves, the extra benefits that we want to investigate in
this article are not indirect effects.

Section 2 of this paper defines the different time dimensions of freight
transportation services. Section 3 briefly demonstrates that current practices take into
account only factor costs. Section 4 advocates the inclusion of other benefits. Section 5
investigates how to quantify these extra benefits.

1. Definition of Time Savings in Freight

Transportation.

When investigating the value of freight travel time savings, one should recognise
the multiplicity of time dimensions involved in goods transportation. The list hereafter
illustrate the variety of concepts that one can link to the freight value of time.

• The value of reducing the time necessary for the transportation of the good.

• The value of the reliability in consignment hours.

• The value of the flexibility in organising consignment at shippers request.

• The value of the frequency for fixed schedule transport services.

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