Use of logsums in welfare estimation: application in PRISM
Welfare estimation lies at the heart of most appraisal processes. A number of techniques are used for the estimation of consumer surplus gained or lost due to the implementation of a project. The use of random utility maximisation (RUM) based on logit models opens up a new dimension in the welfare estimation techniques with the use of the "logsum" as an evaluation measure. In this paper we examine a number of applications of the logsum technique to evaluate consumer surplus under different scenarios. The model used for the applications is PRISM, the new strategic transport model of the West Midlands in the U.K. (described in a paper presented to the 2004 ETC (by van Vuren et. al)). The theory behind the use of logsum measures for the calculation of consumer surplus is quite comprehensive, however applications of this measure in real life models remain sparse. It is this link between theory and application of the logsum technique that we have tried to bring forward in this paper. While the theory behind logsum provides significant support in the development of a welfare calculation methodology, a number of theoretical and practical issues arise in the application of this measure, when dealing with models like PRISM; they are highlighted in this paper and solutions are proposed. The test studies the impact of a particular set of network interventions which improve the transport infrastructure in the West Midlands. The strength of the logsum technique in being able to evaluate the welfare benefits simultaneously for each of the market segments that exist in the structure of the models is discussed in detail. Market segmentation based on attributes of the consumer (traveller) in the model structure, like employment status, car-ownership and age in some cases, facilitates a detailed analysis of the impacts on consumer surplus for different sections of society. An extension of the results could be interpreted as social exclusion indicators for e.g. welfare benefits to different age groups or the unemployed. A particular feature of the consumer surplus calculation is that the logsum formulation is no longer correct when household income is included in a non-linear functional form in the RUM models. A more rigorous theoretical approach needs to be taken in this case for the evaluation of welfare benefits. As in PRISM household income only appears as one of the market segmenting attributes the logsum technique is appropriate. For the covering abstract see ITRD E135582.
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Availability:
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Corporate Authors:
Association for European Transport (AET)
1 Vernon Mews, Vernon Street, West Kensington
London W14 0RL, -
Authors:
- KOHLI, S
- DALY, A
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Conference:
- European Transport Conference (ETC)
- Location: Strasbourg , France
- Date: 2006-9-0 to 2006-9-0
- Publication Date: 2006
Language
- English
Media Info
- Pagination: 22p
- Monograph Title: Proceedings of the European Transport Conference (ETC) 2006, held September 2006, Strasbourg, France
Subject/Index Terms
- TRT Terms: Age; Conferences; Costs; Evaluation; Forecasting; Households; Income; Motor vehicles; Ownership; Tests; Travel
- Uncontrolled Terms: Use
- ITRD Terms: 1757: Age; 8525: Conference; 224: Cost; 9020: Evaluation (assessment); 132: Forecast; 309: Household; 256: Income; 698: Journey; 6255: Test; 9084: Use; 315: Vehicle ownership
- Subject Areas: Finance; Planning and Forecasting; Society; I72: Traffic and Transport Planning;
Filing Info
- Accession Number: 01086744
- Record Type: Publication
- Source Agency: Transport Research Laboratory
- ISBN: 1905701012
- Files: ITRD
- Created Date: Jan 29 2008 8:37AM