Stochastic Production Frontier Models to Explore Constraints on Household Travel Expenditures Considering Household Income Classes

Abstract

This paper explores the variation of household travel expenditure frontiers (HTEFs) prior to CC reform in Jakarta. This study incorporates the variation of household income classes into the modeling of HTEFs and investigates the degree to which various determinants influence levels of HTEF. The HTEF is defined as an unseen maximum (capacity) amount of money that a certain income class is willing to dedicate to their travel. A stochastic production frontier is applied to model and explore upper bound household travel expenditure (HTE). Using a comprehensive household travel survey (HTS) in Jakarta in 2004, the observed HTE spending in a month is treated as an exogenous variable. The estimation results obtained using three proposed models, for low, medium and high income classes, show that HTEFs are significantly associated with life stage structure attributes, socio-demographics and life environment factors such as professional activity engagements, which is disclosed to be varied across income classes. Finding further reveals that considerable differences in average of HTEFs across models. This finding calls for the formulation of policies that consider the needs to be addressed for low and medium income groups in order to promote more equity policy thereby leading to more acceptable CC reform.

Understanding Household's Travel Costs Budget Frontier in Banda Aceh, Indonesia

“…The findings also showed 80 % were working while the remaining were university students, housewives and part-time workers. Moreover, approximately 92 % have their own house while only 8 % lived in a rented apartment and the monthly income attribute indicated 67 % are categorized as low-medium with income below 5 million IDR [17]. The information also showed 73 % spent 0.2 to 1.5 million IDR (1 USD @ 14.09 thousand IDR) of their monthly income on travel.…”

“…Moreover, the calibrated model parameters in Table 5 were found to be corresponding with income groups as observed with the tendency to be constrained by spending more income on commuting trips, private mode usage, owning private mode of transportation and based on the household members, as well as the limited income, which restricts certain group from spending on transportation. Furthermore, the R-value for the low-medium and high-income groups was recorded to be is 0.642 and 0.837, respectively and this means that the high-income group actual costs expenditure is closer to their frontier values, while those in a low-medium group mostly use their frontier due to lack of buffer [1,17].…”

“…burden on income constraints compared to travel time expenditure. Perhaps, the earliest studies on the travel costs expenditure or transportation expenditure have been conducted by [1,17]. They utilized the SFA to estimate unobserved travel costs frontier or capacity within the targeted household.…”