The Full Cost of Intercity Highway Transportation

1. The Full Cost of Intercity Highway Transportation by David Levinson and David Gillen Levinson, David, and David Gillen (1997) The Full Cost of Intercity Highway Transportation. Transportation Research -D 3:4 207-223. http://nexus.umn.edu/Papers/FullCostIntercityHighways.pdf

2. Motivation • How do highway cost functions look? • Which components exhibit scale & scope economies (what are they) ? • How big are social vs. private costs? • Are various modes of transportation are implicitly subsidized? • To what extent does this bias investment and usage decisions?

3. Full Cost (FC) Model • FC = (CUT - TU) + CI + CE + CN + CA + CT • User Costs (CU), • Total costs borne by users (CUT). • cost of vehicle ownership (as measured by depreciation) • the cost of operating and maintaining the vehicle (including gas, tires, repairs and such). • User Transfers (TU) = (infrastructure, accident and safety) • Infrastructure Costs (CI), • Environmental Costs (CE), • Noise Costs (CN), • Accident and Safety Costs (CA), and • Time Costs (CT).

4. User Costs (CU) • CU = f(Cg, Co, Ct, Cf, Cp, Cc, Cl, Cd(A,Y), A,Y) • CU = (Cg + Co + Ct)Y + Cf + Cp + Cc + Cl + Cd(A,Y) • TU(Y) = Cf + Cp + Cc + Cl • CUN(Y) = CUT - TU = (Cg + Co + Ct)Y + Cd(A,Y) • CUT (Y) = User Operating Cost ($/yr.) as a function of output (Y) • TU (Y) = User Transfer Costs ($/yr.) • CUN (Y) = Net User Costs ($/yr.) • Cg = Cost of Gas ($/km) • Co = Cost of Oil ($/km) • Ct = Cost of Tires ($/km) • Cf = Cost of fire and theft (insured) ($/yr.) • Cp = Cost of property damage and liability (insured) ($/yr.) • Cc = Cost of collision (insured) ($/yr.) • Cl = Cost of licenses, fees, and taxes ($/yr.)

5. Cost of Depreciation (Cd) • Cd(A,Y) = - ß1 A - ß2 AY • Cd(A,Y) = Cost of depreciation ($/yr.) as function of years and output • Y = Output in distance traveled per year (km) • A = Age (years over which car is depreciates), for purposes of our analysis • A=1 when determining annual depreciation • ß1, ß2 = coefficients from price model discussed in the following section

6. Used Car Price Model • P = ß0 + ß1 A + ß2 AY + ß3 M • P = asking price (current $). • A = Age of auto. = 1996 - Model Year • Y = Miles per Year for car • M = Make 1 if the car was a Ford Taurus, 0 if it was a Honda Accord • ßx = model coefficients

7. User Costs Summary

8. Total Expenditures • Outputs in mvmt • cars (Ya), • single unit trucks (Ys), • combination trucks (Yc) • Inputs: • price of capital (Pk), • price of labor (Pl), • price of materials (Pm). • FHWA data: maintenance, operating, and administrative costs • capital stock data collected

9. Infrastructure Costs • TE= Ck + Cl + Cm • = f (Ya, Ys, Yc, Pk, Pl, Pm) + e • = ß0 Yaß1 Ysß2 Ycß3 Pkß4 Plß5 Pmß6+ e • = 79221 Ya 0.439 Ys 0.179 Yc 0.225 Pk 1.83 Pl 0.786 Pm 0.00492

10. Infrastructure Cost Model

11. Infrastructure Cost Summary

12. Conclusions • Importance is not only estimate of costs, but framework for comparison • Infrastructure: Marginal Cost > Average Cost • but Driving Marginal Cost < Average Cost • --> Incentive to Drive • Freeflow Time is largest cost category • Pollution is small share of total costs, even with very “liberal” estimates of their cost. • Point Estimates should be treated cautiously, look at the functions.