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A Duration Approach for Estimating the Marginal Renewal Cost at German Motorways

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  • Neil Murray
  • Heike Link

Abstract

We estimate the marginal costs of road renewals as part of a social marginal cost scheme for road user charging. Within an analytical approach that mirrors the relationship between road deterioration, traffic load and road renewal, we use an accelerated failure time model for road pavement with the purpose to derive the effect from traffic increase on the length of road renewal cycles. Based on a comprehensive dataset for German motorways we fit a Weibull duration model with covariates such as traffic load from heavy vehicles as well as various control variables and derive the road deterioration elasticity with respect to heavy traffic. Similar to available studies for Sweden we find a deterioration elasticity below one, implying that Newbery’s (1985) fundamental theorem does not hold for the German motorway network. The shape parameter of the Weibull function indicates that there is an ageing or weathering effect, and higher traffic loads are not the sole factor impacting on shorter pavement lifetimes. Our estimations yield a marginal renewal cost, which makes up approximately 40% of the average renewal cost. It implies that road user charges based on marginal costs will not yield a sufficient revenue to cover total costs.

Suggested Citation

  • Neil Murray & Heike Link, 2020. "A Duration Approach for Estimating the Marginal Renewal Cost at German Motorways," Discussion Papers of DIW Berlin 1898, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1898
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.799907.de/dp1898.pdf
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    References listed on IDEAS

    as
    1. Link, Heike, 2006. "An econometric analysis of motorway renewal costs in Germany," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 19-34, January.
    2. Phill Wheat & Andrew S. J. Smith, 2008. "Assessing the Marginal Infrastructure Maintenance Wear and Tear Costs for Britain's Railway Network," Journal of Transport Economics and Policy, University of Bath, vol. 42(2), pages 189-224, May.
    3. Andersson, Mats & Smith, Andrew & Wikberg, Åsa & Wheat, Phill, 2012. "Estimating the marginal cost of railway track renewals using corner solution models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 954-964.
    4. Small, Kenneth A & Winston, Clifford, 1988. "Optimal Highway Durability," American Economic Review, American Economic Association, vol. 78(3), pages 560-569, June.
    5. Newbery, David M, 1988. "Road Damage Externalities and Road User Charges," Econometrica, Econometric Society, vol. 56(2), pages 295-316, March.
    6. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    7. Prozzi, J A & Madanat, S M, 2004. "Development of Pavement Performance Models by Combining Experimental and Field Data," University of California Transportation Center, Working Papers qt6cf8v5cw, University of California Transportation Center.
    8. Jiang, Chenming & Bhat, Chandra R. & Lam, William H.K., 2020. "A bibliometric overview of Transportation Research Part B: Methodological in the past forty years (1979–2019)," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 268-291.
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    More about this item

    Keywords

    Duration model; accelerated failure time model; fundamental theorem; marginal cost; road transport;
    All these keywords.

    JEL classification:

    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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