Speed and Income

The relationship between speed and income is established in a microeconomic model focusing on the trade-off between travel time and the risk of receiving a penalty for exceeding the speed limit. This is used to determine when a rational driver will choose to exceed the speed limit. The relationship between speed and income is found again in the empirical analysis of a cross-sectional dataset comprising 60,000 observations of car trips. This is used to perform regressions of speed on income, distance travelled, and a number of controls. The results are clearly statistically significant and indicate an average income elasticity of speed of 0.02; it is smaller at short distances and about twice as large at the longest distance investigated of 200 km. © 2005 LSE and the University of Bath