User benefit assessment by a dynamic LUTI model for Madrid

Assessing users’ benefit in a transport policy implementation has been studied by many researchers using theoretical or empirical measures. However, few of them measure users’ benefit in a different way from the consumer surplus. Therefore, this paper aims to assess a new measure of user benefits by weighting consumer surplus in order to include equity assessment for different transport policies simulated in a dynamic middle-term LUTI model adapted to the case study of Madrid. Three different transport policies, including road pricing, parking charge and public transport improvement have been simulated through the Metropolitan Activity Relocation Simulator, MARS, the LUTI calibrated model for Madrid). A social welfare function (WF) is defined using a cost benefit analysis function that includes mainly costs and benefits of users and operators of the transport system. Particularly, the part of welfare function concerning the users, (i.e. consumer surplus), is modified by a compensating weight (CW) which represents the inverse of household income level. Based on the modified social welfare function, the effects on the measure of users benefits are estimated and compared with the old WF ́s results as well. The result of the analysis shows that road pricing leads a negative effect on the users benefits specially on the low income users. Actually, the road pricing and parking charge implementation results like a regressive policy especially at long term. Public transport improvement scenario brings more positive effects on low income user benefits. The integrated (road pricing and increasing public services) policy scenario is the one which receive the most user benefits. The results of this research could be a key issue to understanding the relationship between transport systems policies and user benefits distribution in a metropolitan context.

Exploring users inter-temporal preferences for measuring transport social equity effects

There exist different ways for defining a welfare function. Traditionally, welfare economic theory foundation is based on the Net Present Value (NPV) calculation where the time dependent preferences of considered agents are taken into account. However, the time preferences, remains a controversial subject. Currently, the traditional approach employs a unique discount rate for various agents. Nevertheless, this way of discounting appears inconsistent with sustainable development. New research work suggests that the discount rate may not be a homogeneous value. The discount rates may change following the individual’s preferences. A significant body of evidence suggests that people do not behave following a constant discount rate. In fact, UK Government has quickly recognized the power of the arguments for time-varying rates, as it has done in its official guidance to Ministries on the appraisal of investments and policies. Other authors deal with not just time preference but with uncertainty about future income (precautionary saving). In a situation in which economic growth rates are similar across time periods, the rationale for declining social optimal discount rates is driven by the preferences of the individuals in the economy, rather than expectations of growth. However, these approaches have been mainly focused on long-term policies where intergenerational risks may appear. The traditional cost-benefit analysis (CBA) uses a unique discount rate derived from market interest rates or investment rates of return for discounting the costs and benefits of all social agents included in the CBA. However, recent literature showed that a more adequate measure of social benefit is possible by using different discount rates including inter-temporal preferences rate of users, private investment discount rate and intertemporal preferences rate of government. Actually, the costs of opportunity may differ amongst individuals, firms, governments, or society in general, as do the returns on savings. In general, the firms or operators require an investment rate linked to the current return on savings, while the discount rate of consumers-users depends on their time preferences with respect of the current and the future consumption, as well as society can take into account the intergenerational well-being, adopting a lower discount rate for today’s generation. Time discount rate of social actors (users, operators, government and society) places a lower value in a future gain, but the uncertainty about future income strongly determines the individual preferences. These time and uncertainty depends on preferences and should be integrated into a transport policy formulation that may have significant social impacts. The discount rate of a user cannot be the same than the operator’s discount rate. The preferences of both are different. In addition, another school of thought suggests that people, such as a social group, may have different attitudes towards future costs and benefits. Particularly, the users have different discount rates related to their income. Some research work tried to modify user discount rates using a compensating weight which represents the inverse of household income level. The inter-temporal preferences are a proxy of the willingness to pay during the time. Its consideration is important in order to make acceptable or not a policy or investment