Transportation Expenditures and Ability to Pay: Evidence from Consumer Expenditure Survey

Abstract

Data at several levels of aggregation and spatial resolution show that mobility (measured by different outcomes such as vehicle miles traveled and automobile ownership) increases with income. It is equally likely that, in turn, investments in mobility (purchase and operation of private automobiles, consumption of public transportation services) allow greater quality of life in general and the ability to increase one's income. This possibly circular relationship is explored by using the Consumer Expenditure Survey (CEX) data set. Single-equation Tobit models of annual household transportation expenditures are posited with, in the first case, annual before-tax income and, in the second case, annual total household-level expenditures as a proxy for permanent income. With a variety of demographic, community and spatial, economic, family, and life-cycle conditions of the household controlled, it is found that permanent incomes explain mobility investments better than annual incomes. However, mobility investments and ability to pay are likely to be endogenous since it seems that a greater investment in mobility would lead to positive economic outcomes such as the ability to travel to distant but higher-paying jobs, better and more productive integration of social and household activities into one's work life, and flexibility in job search and ability to change employers to obtain higher wages and benefits without having to make residential location changes. This potential reverse causality is explored by means of a two-stage model in which the censored mobility investment variable and the household's ability to pay are jointly modeled.

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