HOW DOES CONGESTION MATTER FOR JAKARTA S CITIZENS?

Transcription

1 Journal of Indonesan Economy and Busness Volume 30, Number 3, 2015, HOW DOES CONGESTION MATTER FOR JAKARTA S CITIZENS? Sonny Harry Budutomo Harmad Faculty of Economcs and Busness Unverstas Indonesa (sonny_harmad@yahoo.com) Muhammad Halley Yudhstra Faculty of Economcs and Busness Unverstas Indonesa (mhyudhstra@gmal.com) Decky Prambodo Koesrndartono Faculty of Economcs and Busness Unverstas Indonesa (decky.prambodo@gmal.com) ABSTRACT Jakarta, as the bggest cty n Indonesa, faces many problems, one of whch s congeston, that produces a hgh cost economy. It s predcted that f the government does not take mmedate acton to solve ths problem, there wll be a potental loss of IDR65 trllon by 2020 (Bappenas, 2007). Ths conssts of IDR28.1 trllon n operatonal costs and IDR36.9 trllon n opportunty costs from tme lost. Ths study s amed at estmatng how much Jakarta ctzens are wllng to pay to overcome the congeston problem. By usng the stated preference method, the estmaton result shows that the annual cost of congeston n Jakarta s estmated at IDR50.2 trllon a year. Furthermore, ths result can be used as a baselne for a cost-beneft analyss by the government to generate a better publc transportaton polcy n Jakarta. Keywords: wllngness to pay, congeston, stated preference method, condtonal logt INTRODUCTION Congeston s a common phenomenon n every bg cty n the world, ncludng n Jakarta. The ncreasng flow of vehcles nto and out of Jakarta causes the roads n Jakarta to become more congested. Ths s not surprsng gven the fact that Jakarta s the economc center for the western Java area. In fact, one can also say that all of Indonesa s economc actvty s centered on Jakarta. Although congeston has become nevtable, the condton of Jakarta s congeston has reached worryng levels. Congeston s a form of negatve externaltes that could lead to economc neffcency. The tme taken to travel from one place to another becomes longer whch mples greater opportunty costs. As a result, the cost of makng one trp would also ncrease. These condtons are one of the problems slowng the economc growth and development of Jakarta, whch also affects the development of the area around Jakarta. The tme taken to travel a set dstance wthn Jakarta almost doubled between 1985 and 2000 (Harmad, 2006). The estmated costs arsng from congeston, car accdents, and polluton

2 2015 Harmad et al. 221 have reached about IDR1 trllon per year. Moreover, t s predcted that f the congeston problem cannot be mmedately resolved, then the potental losses wll reach IDR65 trllon by the year 2020 (Bappenas, 2007). Ths predcted loss was calculated based on two parameters only,.e. losses due to vehcle operatng costs, amountng to IDR28.1 trllon and the tme loss whch s estmated to be worth around IDR36.9 trllon. These calculatons do not nclude the costs of envronmental deteroraton (.e. the costs from varous knds of polluton such as ar polluton and nose polluton), faled transactons, declnng productvty and compettveness as compared to other major ctes n the Southeast Asan regon (Bappenas, 2007). Certanly, congeston n Jakarta has fundamental problems that must be quckly resolved, one of whch s the dsproportonal transportaton structure and systems. The numbers of vehcles on Jakarta s roads grows faster than the exstng roads. As an llustraton, the transportaton modes n Jakarta and ts surroundng areas were domnated by prvate vehcles (approxmately 53.4 percent) n Of ths proporton, 40.3 percent consst of prvate passenger cars, whle the rest are motorcycles. Compared to 1998, the number of prvate passenger cars has rsen by 40 percent, from 1 mllon to 1.4 mllon unts, whle the number of motorcycles has ncreased by 60 percent, from 1.5 mllon to 2.4 mllon unts (Asr & Hdayat, 2005). It s well-known n transportaton lterature that addng a new lnk connectng two routes runnng between a common orgn and a common destnaton may not reduce congeston n the network, but nstead ncrease the travel tmes for each network user. Ths phenomenon s called the Braess paradox, named after Detrch Braess, an operatons researcher who frst publshed a paper explanng ths fndng. In the lterature, the Braess paradox s no longer a paradox because the cause of the paradox has already been dentfed. Therefore, accordng to Yosef Sheff, t and smlar traffc flow phenomena should be called pseudo-paradoxes (Pas and Prncpo, 1997). Zverovch and Avner (2015) descrbed dscussons on the development of the paradox. In ther work, they explaned that Anna Nagurney had proved that the paradox dsappears under a hgher demand, as well as how to avod t by addng resources to a network n an effcent manner. The stuaton whch occurred n 2002 was most lkely dfferent when compared wth the current condtons, especally for the number of motorcycles. The growth rate of motorcycles has ncreased due to the ncreasng economc stablty present snce The worsenng congeston condtons also contrbute to encourage people, especally the mddle class ctzens, to use motorcycles as an alternatve mode of transportaton. The growth rates of prvate vehcles operatng on the roads of Jakarta were not accompaned by a growth n the avalable roads, ether n ther number or ther wdth. Currently, the growth rate of road constructon wthn Jakarta s only reachng less than 2 percent per year. The same s true for publc transportaton facltes, whch n ther quantty and qualty are stll below the standard requred. If ths stuaton contnues, then t s predcted that Jakarta wll experence total congeston by the year Currently, the local government of DKI (Daerah Khusus Ibukota or the captol specal regon) Jakarta s revewng varous alternatves to solve congeston problems n the long run. One of these s to ncrease and buld mass transportaton systems, such as the busway, whch s now n the process of addng new corrdors, or a monoral and subway system. The only problem wth ths soluton s the government faces huge costs to fund these solutons, whle ther obtaned benefts cannot be properly estmated. Therefore, the beneft measurement of varous transportaton polces becomes very mportant and of fundamental value. The beneft measurement of the provson of publc transportaton can be done through varous approaches. The man pont s to look at the costs that can be avoded f publc transportaton s provded and used, then t s possble to compare whether the cost savngs or benefts obtaned are greater, equal, or less than the costs ncurred to provde the publc transportaton.

3 222 Journal of Indonesan Economy and Busness September Publc nfrastructure wll be realzed f the benefts obtaned are greater than the ncurred costs, and vce versa. So far, all the studes ever conducted n Indonesa to measure the benefts were based on the calculaton of the drect costs of congeston. In fact, the measurement of these benefts can also be vewed from the perspectve of how much the socety s wllng to avod congeston, whch can be monetzed by an amount of money. Ths calculaton s more approprate snce ths technque ncorporates all the possble costs resultng from congeston problems. Therefore, the man objectve of ths study s to estmate the wllngness to pay, by the people n Jakarta, to avod ther congeston problems. Congeston mposes greater travel costs for road users, thus they would have ther own preference for avodng congeston. These preferences are reflected through the amount they are wllng to pay to avod congeston. LITERATURE REVIEW Congeston s one of the urban problems that always produce nterestng dscussons. Congeston s an example of the negatve externaltes resultng from traffc flow passng along roads. Externaltes can be formed as an ncrease n the travel tme, nose polluton, ar polluton, excessve fuel consumpton, and car accdents (Button, 1995). Of all the externaltes arsng from congeston, the problem of travel tme has been the most dscussed topc n research about urban congeston. Each road user, partcularly the vehcle users or drvers, wll compete wth other vehcle users up to a certan degree. In other words, roads wll have rvalry characterstcs startng from a certan stage. Therefore, any addtonal vehcles passng along the road must cause longer travel tmes to be faced by the other vehcle users. Hence, ths would cause externaltes n the form of greater commutng costs for each vehcle user, along wth larger opportunty costs (Sullvan, 2006). Externalty n the form of greater commutng costs has caused the equlbrum not to reflect the optmum number of vehcles on a road. The nature of negatve externalty, as uncalculated costs, wll eventually cause the number of vehcles on a road to exceed ts optmum level. The result s the emergence of excessve traffc, or the so-called congeston. The nternalzaton of ths external cost can be performed through mposng the nstrument of a congeston tax. Ths taxaton shfts the margnal prvate cost faced by each drver to be equal to the margnal socal cost to the economy, so the equlbrum wll fnally be at an optmum pont. Wthn the larger framework, the exstence of margnal congeston costs should be ncluded n the valuaton scheme for the road prcng (Anderson & Bonsor, 1974) as shown n Fgure 1. Fgure 1 shows how the congeston externaltes occur and dstort the economy. Equlbrum occurs at pont where the margnal beneft equals the prvate trp cost faced by vehcle users on the road. As there are externaltes arsng due to the ncreased travel tme of each vehcle user, resultng from the ncreased number of vehcle users, the cost that should be faced s a margnal trp cost, whch accommodates these externaltes. Thus, the optmum level wll occur at pont e, where the number of vehcles on the road s fewer (1400 vehcles), compared to the equlbrum level (1600 vehcles). The process of externalty nternalzaton s conducted through applyng a congeston tax that shfts the cost structure faced by vehcle users,.e. shftng the prvate trp cost to the margnal socal cost.

4 2015 Harmad et al. 223 Source: Sullvan (2006) Fgure 1. Externaltes and Congeston Tax In practce, congeston taxes have varous forms, such as toll road taxes, fuel taxes and parkng taxes (Sullvan, 2006). Other forms of taxaton nclude taxes on tres and other spare parts, as well as drect road taxes that are electroncally appled va smart cards, optcal systems, nfrared scanners etc. (Johansson and Mattsson, 1995; Johansson-Stenman, 2005). Those forms of taxaton could be mplemented as long as they satsfy the beneft and equty prncples (Stgltz, 2000). The optmal tax can be determned through the publc road and vehcle users preferences about the exstng congeston. It s necessary to determne how much the ctzens are wllng to pay to avod congeston snce the man objectve of a congeston tax s to nternalze the costs of congeston so that the exstng congeston can be reduced. Congeston s also a loss to the economy, so what needs to be determned here s the wllngness of people to pay to overcome ths loss (Pearce and Turner, 1990). In ths case, publc road users must determne how much cost they are wllng to ncur n avertng congeston based on the current traffcs congested condton. One example of a study concerned wth the wllngness to pay for congeston s the study conducted by Tretvk (1995). In hs study, Tretvk estmated the magntude of the wllngness to pay for tme savngs by the users of the Trondhem toll road. The smulatons were carred out by usng panel data and by dvdng the toll road users nto three groups based on ther travel purposes,.e. commutng, busness, and others. Accordng to the smulaton results, t was found that the value of the tme saved by each group was dfferent for each group. The group on busness trps put the hghest value on tme savng, followed by the group of others and the commutng group. Furthermore, the results of ths study showed that the wllngness to pay for the tme savng by each Trondhem toll road user group were 73 NOK per hour for the commutng group, 120 NOK per hour for others group, and 138 NOK per hour for the busness trp group. Apart from usng the approach appled by Tretvk, the calculaton for wllngness to pay can also be estmated by other methods, such as the Stated Preference Method (SPM). Ths method, whch wll be used by ths research, s often used to observe cases relatng to natural resources and envronmental ssues. There are

5 224 Journal of Indonesan Economy and Busness September several related studes that also use ths method. Patunru et al. (2007) used SPM to estmate the benefts obtaned from the cleanng up of pollutant substances n Waukegan Harbor, Illnos. By developng the determned attrbutes, t was concluded that the wllngness to pay by the homeowners for the overall clean up would cost a mnmum of US$582 mllon. The method mplemented by Tretvk can be classfed as a contngent valuaton method whch s a common method to quantfy, or, on some other occassons, to monetze, peoples preferences. In the early 1990s, the Contngent Valuaton (CV) method was crtzed as dubous, at best, or even hopeless. Hausman (2012) found three endurng problems: 1) Hypothetcal response bas leadng the contngent valuaton to overstate the value; 2) large dfferences between the wllngness to pay and the wllngness to accept; and 3) the embeddng problem whch encompasses scope problems. The last ssue reflects that the answers by the respondents to the survey were mplausble and nconsstent. The problems of the CV method have been dscussed for at least three decades. Hypothetcal bas means that the respondents have no market experence; n other words, ther actons dffer from ther statements. In terms of wllngness to pay, the tendency of bas s n an upward drecton, meanng that the result measurement tends to be overstated. CV questons consst of two man deas: How much the respondent would pay to avod a negatve outcome (or to acheve a postve outcome) and how much the respondent would need to accept the negatve outcome (or not to receve a postve outcome). The frst s commonly known as the wllngness to pay approach and the later as the wllngness to accept approach. Economc theory suggests that these two approaches should gve, prncpally the same answer, but large and persstent dspartes commonly arse n answers to CV surveys. The most fundamental challenge to the CV method, accordng to Hausman (2012) comes from concerns that the answers gven by the respondent are nvented, n response to the questons. The CV method s not perfect, but the alternatve s to place a zero value on goods that the publc cares about. A consderable body of evdence now supports the vew that the CV method, f done approprately, can provde a relable bass for gaugng what the publc s wllng to trade off to obtan well-defned publc goods (Carson, 2012). In addton, despte the crtcsm, the last 20 years of research have shown that some carefully constructed number bases are now more lkely to be useful than no number, n most nstances, for both cost-beneft analyss and damage assessment. It serves as a model for the evaluaton of other polcy-crtcal technques (Klng, et al., 2012). Smlar to the study conducted by Patunru et al. above, Shrestha and Alavalapat (2004) tred to estmate the envronmental benefts of the slvopasture practce n Lake Okeechobee, Florda. The attrbutes used n ths study ncluded the water qualty, absorpton of CO2, bodversty, and the ncrease of the state s utlty tax. Ths study concluded that the average wllngness to pay of households ranged from US$0.21 to 71.7 per year for a perod of 5 years. Ths amount would eventually reach up to US$924.4 mllon for a moderate mprovement f all the wllngness to pay from all the exstng households were summed up. METHODOLOGY The benefts of the government s efforts to reduce the traffc congeston problems n Jakarta can be measured by the costs whch people are wllng to pay to avod the congeston. The ncrease of socal utlty, as a result of the reduced congeston, should be compensated by the amount of money that must be spent. Ths framework can be specfcally descrbed usng the Hcksan demand curve, whch s often referred to as the compensated demand curve and the compensatng varaton. Wth ths ratonale, the ntal condton faced by the people of Jakarta s a condton of severe congeston, as s seen now. Longer travel tmes, coupled wth the low safety and connectvty of the transportaton systems, smply descrbe what s perceved by the transportaton

6 2015 Harmad et al. 225 users of Jakarta today. On the other hand, mprovements n transportaton can be measured by shortened travel tmes, hgher safety levels, and better connectvty. Traffc congeston has ncreased travel tmes, so the publc s desre to avod congeston can also be defned as the publc s desre to shorten ther travel tmes. In other words, the publc s desre to ncrease ther tme savng durng a trp s an alternatve defnton of a desre to avod congeston, such that utlty ncreases along wth the ncreasng tme savng. Ths desred mprovement s then compensated for by the extent to whch people are wllng to pay for that mprovement, whch also represents the compensatng varaton of the utlty functon. In order to estmate the amount of welfare (utlty) change that would occur f congeston problems n Jakarta were reduced, ths study used a random utlty model whch ncluded the error term n the consumer utlty functon. Ths model was then approxmated by chocemodelng analyss and solved by usng the econometrc method of condtonal logt. In addton, the estmaton of the wllngness to pay for avertng congeston n Jakarta nvolved prmary data whch were obtaned by usng questonnares. The questonnare was arranged based on predetermned attrbutes and dstrbuted to the respondents, who are the users of Jakarta s roads. 1. Samplng Procedures In order to obtan accurate estmates and generalzatons, probablstc samplng s requred. Ths technque requres a random samplng from the populaton lst so t can provde equal opportuntes for each ndvdual n the populaton to be selected as the sample (Sugyono, 2002). In ths study, the unt of analyss of the populaton s any and all the ctzens, both n Jakarta and also outsde Jakarta, who use the transportaton facltes wthn Jakarta. The deal technque to use s a stratfed random samplng, gven the populaton structure. Hence, ths study needed a lst of the entre populaton that used the transportaton facltes n Jakarta. Problems arose when t was fnally realzed that acqurng a lst of the transportaton facltes users was almost mpossble because the related populaton database was not avalable. Consequently, the samplng process that was orgnally planned for use, the stratfed random samplng method, could not be used. In fact, no type of probablstc samplng approach could be used, therefore the method used n ths study was a non-probablstc samplng,.e. a purposve samplng method. The scope of ths research s mostly located n busness and offce center areas n Jakarta. These areas are the targeted areas where road prcng s gong to be appled. The man crteron n determnng the selected areas depended on the characterstcs of the area tself. These areas are characterzed as congested areas, and also areas contanng many workng ctzens havng relatvely hgh educaton levels. The selected areas ncluded: Natonal Monument (Monas), Sudrman Thamrn Street, HR Rasuna Sad Street, Gatot Subroto Street (.e. the end of Sudrman Street and HR Rasuna Sad Street), and Prof. Dr. Satro Street (whch s bounded by Sudrman Street and HR Rasuna Sad Street). Based on the Study on the Integrated Transportaton Master Plan for Jabodetabek (Jakarta, Bogor, Depok, Tangerang and Bekas) (SITRAMP, 2004), these areas have the best qualfcatons, based on the smulaton results, for observng whch area s producng the hghest percentage reducton n the number of vehcles due to the mplementaton of the 3 n 1 polcy. 2. Questonnare Desgn Estmatons about how much the ctzens are wllng to pay n order to reduce congeston nvolves a survey approach for the prmary data of the road users n Jakarta. The status quo s defned as the current condton faced by socety, n the form of severe congeston problems. Ths ex ante condton becomes the bass for predctng how much the people of Jakarta are wllng to spend as compensaton for reducng the current traffc congeston problems.

7 226 Journal of Indonesan Economy and Busness September A condtonal logt approach s used n ths study to accommodate the dscrete and bnary dependent varables. The dependent varable s the condtonal probablty n choosng a travel scheme (.e. the status quo or a new type of trp). The determnstc part of the utlty s represented by the varous travel attrbutes,.e. travel tme, connectvty, safety, and transportaton costs. The determnaton of these four attrbutes s carred out based on expert judgments of the factors that people consder n travellng to and from Jakarta. In general, the operatonal defnton of each attrbute can be seen n Table 1 below. The use of multple attrbutes n an experment desgn based on a choce-modelng approach requres a code transformaton, such as that accomplshed by Louvere (1988), whch s also better known as an effect code. Ths effect code transforms the ordnal varables nto a code system that can be used n econometrc analyss. The code system s dfferent from the ordnary Table 1. Operatonal Defnton of Each Attrbute dummy varable approach. Its benchmark level s labeled wth a value of 1. For example, the attrbute of connectvty (K) has three levels,.e. the status quo (KQ), moderate connectvty (KM), and excellent connectvty (TO) n whch the status quo level becomes the benchmark level. These levels, KQ, KM, and KE, are gven a value of -1, 0, and 1 respectvely. Thus, the value of the status quo level s a negatve summaton of the utltes obtaned from the moderate and excellent levels. There are also other varables used n ths study,.e. travel tme and safety. These varables do not need to use effect codes because both of these varables are rato varables. Of the four attrbutes, only the connectvty attrbute requres a transformaton by usng effect codes, gven that ths attrbute s not contnuous. On the other hand, other attrbutes are contnuous so they do not requre a smlar transformaton. Varables Descrpton Level Travel Tme Connectvty Safety Transportaton Cost The amount of tme spent to travel from orgn to destnaton pont Number of transts needed to reach destnaton pont wthn one trp Safety measures n dong a trp n Jakarta that conssts of traffc safety and property securty The ncurred transportaton cost per month n term of money Status quo, moderate (decrease by 15%), excellent (decrease by 30%) a) Status Quo (no changes n the number of transts) b) Moderate (transportaton mode usage s decreased by 1 mode) c) Excellent (transportaton mode usage s decreased by 2 modes) a) Status Quo (no changes n transportaton convenence and 100 deaths n traffc accdents per year) b) Moderate (ncreasng convenence and 50% decrease n traffc accdents per year) c) Excellent (ncreasng convenence, 50% decrease n traffc accdents per year, 25% ncrease n mproved roads, and 25% ncrease n numbers of obedent road users) Status quo, ncrease by 205, and ncrease by 40% A survey method wth prmary data s the man pont of the experment s desgn n order to get the magntude of the welfare change. The core of the survey s to ask questons to the Jakarta road users about ther choces between the current travel condtons and the offered alternatves condtons. These optons are explctly asked, by also ncludng the four attrb-

8 2015 Harmad et al. 227 utes that have been determned prevously,.e. travel tme, connectvty, safety, and transportaton costs. There are three levels for each attrbute, thus there are 81 possble types of trp that can be selected by the respondents. Certanly, ths amount of choce for the respondents s too much, and could lead to wearness and bas n the respondents. The opton s smplfcaton was done through a trval game approach, wthout reducng the exstng generaltes, so t can acqure 52 possble types of questons. The whole group of questons s then dvded nto fve sets, n whch the respondents were asked to answer 10 sets of optons n each set. 3. Attrbute-Based Stated Choce Method A technque used n estmatng the wllngness to pay for avertng congeston s a chocebased conjont, whch s part of the conjont analyss. A choce-based conjont, often referred to as choce-modelng analyss, s a method often used n the calculaton of economc valuatons. In the context of ths research, an ndvdual's decson n choosng a certan trp s based on certan condtons. Thus, ths decson s obtaned through analyss of the choce-modelng and Random Utlty Model (RUM) approach. The random utlty model states that consumers obtan utlty by choosng varous alternatve bundles of consumpton. In fact, the observable nformaton n determnng consumers preferences s the choces made by the consumers along wth ts varous attrbutes. The RUM decomposes utlty nto two components, namely the determnstc component and the probablstc (random) component. The random component can be taken ether from the characterstcs of the consumer or the attrbutes of commodtes whch are defned by the researchers. On the other hand, the consumer also knows that hs utlty can be completely determned. Thus, ths model combnes two great deas that are the varaton of ndvdual preferences n the populaton and random components n econometrcs (Hanemann, 1984). Formally, ths utlty functon s wrtten as follows (Adamowctz et al., 1998): U = + ε (1) V U denotes the consumers utlty from consumng good, V denotes the determnstc component of the utlty (systemc utlty), and ε denotes the random component of the utlty. The basc concept of the RUM model can be wrtten nto mathematcal equatons for utlty maxmzaton. In general, the RUM model s formally wrtten as follows: max U( t ( A ), z; e ) = 1,..., N (2) s. t.( ) y = p t ( A ) + z (3) ( ) t t j = 0; j (4) ( ) z 0, t ( A ) 0 (5) t denotes a commodty (n ths case, the commodty s travel), as a functon of A, the vector of predetermned specfc attrbutes (travel tme, connectvty, and safety). z denotes a composte fracton of the consumpton of other goods, y denotes ncome, and p denotes the prce of each commodty. The last part of the utlty functon ( e ) s a random factor that shows the stochastc nature of such a utlty functon. The RUM model n the four equatons above reflects that consumers maxmze ther utlty functon n equaton (2) subject to three constrants,.e. equaton (3), (4), and (5). The frst constrant shows the budget constrant, where ncome s assumed to be allocated for travel and the consumpton of composte goods. The second constrant shows that ether choce or j cannot be smultaneously selected. Consumers cannot travel wth the attrbutes of choce as well as of choce j at the same tme. The thrd constrant ensures postve values for each consumed commodty. The RUM model can then be derved nto the uncondtonal utlty functon. Ths functon s formally defned as follows: U = V ( A, p, y, e ) = max[ V1 ( A1, y p1t1 ) + e,..., V ( A, y p t ) e (6) 1 N N N N + N

9 228 Journal of Indonesan Economy and Busness September The equaton above llustrates how a consumer would decde hs consumpton decsons based on the varous avalable choces. A ratonal consumer wll maxmze hs utlty of a number of N choces. Furthermore, f consumers have decded to choose to consume goods, then ths wll have formed the condtonal utlty functon, gven the consumers have already selected travel t : U = V ( t ( A ), p, y, z) + e = V ( A, y p t ) + e (7) Then, the probablty of the choce of travel beng selected by consumers s gven by the followng equaton: Pr( = 1) = Pr( V + e > V + e ) j = Pr( V V > e e ) (8) Ratonal consumers always prefer to consume goods that can gve them greater utlty, so the dfference between the utlty levels of two goods s an mportant factor n determnng the consumers choce. Consumers would prefer the choce of good relatve to good j f the dfference between the systemc utltes of good and j (V V j ) s greater than the errors dfference. The probablstc approach used n estmatng the random utlty functon wthn ths study s the condtonal logt model, whch wll be detaled n subsecton (the Condtonal Logt Model). Moreover, ths study assumes the consumers want to ncrease ther utlty by reducng congeston, so they are wllng to pay an amount of money as compensaton for ths. Hence, the Hcksan model of a compensated demand functon must be used to explan the consumers demand. Hanemann (1984) suggested that the Marshallan demand functon would be equal to the Hcksan demand functon when the utlty functon s a monotonc transformaton, whch s wrtten as follows: j U = f ( t) + γ z + e (9) j j The symbol γ denotes the margnal utlty of ncome. By assumng that f(.) meets the condton of a weak complementary, equaton (9) can be transformed nto a condtonal utlty functon as shown n equaton (10) below: U = f ( A ) + γ ( y p t ) + e (10) The condtonal utlty functon n equaton (10) above s then transformed nto the uncondtonal utlty functon, whch s then used to estmate the welfare change. If ths condtonal utlty functon s appled to an uncondtonal utlty functon, then the new functon can be wrtten as the followng equaton: U = V ( A, p, y, e ) = γy + max[ f ( A γp t 1 1) e,..., f ( A ) γ p t + e ] (11) N N N N In order to calculate the amount of changes n the welfare or the CV, one must determne the before and after condtons. Suppose the before and after condtons are denoted by 1 and 0, respectvely. Good management of the transportaton system wll lead to an ncrease n tme savng, so the consumers utlty wll also ncrease as well. Meanwhle, the CV measures the amount of compensaton pad by consumers to attan the ncreased utlty level. In general, ths condton s formally wrtten as follows: U p, y + CV ) = U ( p, ) (12) 1( y0 In ths case, the CV has a negatve value (Jehle & Reny, 2000). If the CV s mplemented n the uncondtonal utlty functon as defned before, then we can obtan the followng equaton: γ ( y CV ) + max[ f1 ( A1 ) γp1t 1 + 1,..., ( ) 1 0 e 1 fn AN γ pntn + en ] = γ y + max[ f 1 ( A 1 ) 0 0 γ p t + e,..., f ( A ) γp 0 t + e ] (13) N N N N N Thus, the amount of the uncondtonal CV s defned through an equaton as follows: max{ f = 1( A1 ) p1t 1 e1,..., f1( AN ) pnt CV 0 0 max{ ( ) +,..., 0 0 γ f1 A1 p1 t1 e1 f1( AN ) pnt 1 N 1 N N + e N} + e } N...(14) By assumng the error value (ε j ) s followng the extreme value dstrbuton wthn the cond-

10 2015 Harmad et al. 229 tonal logt model, the value of the CV s determned by the followng equaton: S S CV = {ln exp( V ) ln exp( V )} (15) γ The value of the CV obtaned from equaton (14) above s a value for one sngle ndvdual only, so the process of aggregatng the wllngness to pay for all the populaton can be calculated as follows: n = 1 AggregateWTP = N. w. CV (16) w denotes the weght used for each group of road users. The estmaton for the utlty functon used n ths study nvolves four predetermned attrbutes,.e. travel tme, connectvty, safety, and transportaton costs. The lnear equaton s formally wrtten as follows: V 1 1 β 2 = α ASC + β WKT + KONMOD + β KONEX + β SAFE + γ ( Y ) (17) 3 4 P WKT denotes the travel tme, KONEX and KONMOD denote excellent and moderate connectvty, respectvely (the status quo condton s used as the bass varable), SAFE denotes safety, and (Y P) s a numerare, where Y and P denote monthly ncome and transportaton costs, respectvely. Equaton (17) represents the estmaton of the man effects of each attrbute on the utlty functon. It estmates only the effects of every sngle attrbute on the utlty level wthout consderng the nteracton effects between these attrbutes. In fact, t s most lkely that there s nteracton between the attrbutes and ndvdual characterstcs (e.g. ncome level). The resulted nteracton effects reflect the preferences of ndvdual characterstcs on a certan attrbute. For nstance, t s strongly predcted that hghncome ndvduals would have hgher parameter values than low-ncome ndvduals. In other words, ndvduals whose hgher ncome would have a larger decrease n ts utlty level due to congeston (.e. longer travel tmes) as they bear a greater opportunty for the cost of congeston. Hence, the equaton (17) s modfed to nclude the nteracton effects between the attrbutes and ndvdual characterstcs. Equaton (18) represents the estmaton of the nteracton effects of the attrbutes and ndvdual characterstcs on the utlty functon: V = α 1 ASC + WKT ( β1a + β1b INCM + β 1 c INCH + KONMOD( β2a + β2 β 2 c INCH + KONEX ( β3a + β3 β 3 c INCH ) + SAFE( β4a + β4b b b INCM + INCM + INCM + β INCH ) + γ ( Y ) (18) 4c P INCM and INCH are dummy varables used to represent the mddle-ncome group and hghncome group of ndvduals, respectvely. Thus, the parameter values (β) of each attrbute wll be dfferent for each ncome group. 4. Condtonal Logt Model The usage of condtonal logt was frstly ntroduced by McFadden (1974) through the Random Utlty Model (RUM) analyss whch has been dscussed n the prevous secton. Condtonal logt assumes that there s a latent varable Y whch s used to show the degree of ndrect utlty on the choce of 1. Therefore, Y can be defned as follows: Y =1 f Y = max( Y 1,..., Ym ) Y = 0 f otherwse (19) Condtonal logt also assumes the error term ε follows the extreme value dstrbuton, such j that: f ( ε ) j j ε j = e. e e εj e εj F( ε ) = e (20) ( j where f ( ε j ) and F ε ) represent the probablty and cumulatve dstrbuton functon of the 1 The same s also true for the other dependent qualtatve varables approach, e.g. logt and probt model. It assumes that there s a latent varable whch s used to dstngush each response n the model. Also see Gujarat (2003).

11 230 Journal of Indonesan Economy and Busness September error term ε j It also assumes the error term s ndependent and dentcally dstrbuted (d) wth type I extreme value dstrbuton, or better known as the Gumbel dstrbuton. Thus, the probablty of ndvdual selectng the choce j s gven by the followng equaton: P j λv α ' Z j j e e = = (21) λvj α ' Zj Σje Σje The Gumbel dstrbuton s characterzed by the scale parameter λ and also the locaton parameter δ. In practce, t also assumes that λ=1 and δ=0 (Ben-Akva and Lerman (1985) n Seenprachawong, 2002). The applcaton of the condtonal logt model n the RUM model requres the ncluson of an ASC (Alternatve Specfc Constant), a constant used to dstngush between alternatve optons. The ASC s requred to accommodate all the attrbutes that cannot be fully captured by the explanatory varables. The ASC s constant for each of the estmatons that have been estmated, reflectng the average effects of the factors that nfluence consumer choces but these factors are not ncluded n the model. Thus, n ths study, the ASC value s equal to zero for the status quo (current travel condton) and to 1 for the hypothetcal choce (new selected travel route). The estmated results would volate the assumpton of a zero mean of error term f the alternatve specfc constant s not ncluded n the estmaton model (Tran (1996) n Patunru, 2001). The problem of heterogenety s one of the problems that arse due to varatons n the respondents preferences. Ths s clearly nevtable gven the respondents have heterogeneous ndvdual characterstcs. Heterogenety can be ether observed or not observed. Observed heterogenety can be systemcally calculated n the model through the nteracton between the ndvdual characterstcs. FINDINGS AND DISCUSSION 1. Traffc Congeston n Jakarta SITRAMP (2004) had dentfed some of the causes and sources of traffc congeston n Jakarta. Generally, there were four man causes of traffc congeston n Jakarta, and f these ssues are not resolved soon, they wll develop nto more severe congeston problems. a. Road Network Problems Road network performance can be measured through drect ndcators perceved by the road users, one of whch s the speed of vehcles on a certan road. The lower the average speed of the road users s; the lower the road network s performance s. The performance of road ntersectons and each road segment are very nfluental on the overall road network s performance. Congeston on one partcular road segment, e.g. traffc congeston due to the road s constrngency or an ntersecton wth a ralway lne, can develop and lead to congeston on other road segments. The problem of mssng lnks, the nconsstent functonal classfcaton of the roads, the roads constrngency, and mproper ntersecton condtons may cause the traffc management to become less effectve. An nadequate road network system and dsorganzed road herarchy may also lead to conflcts between transportaton modes, and conflcts between communty actvtes (.e. busness, school actvty, etc.).

12 2015 Harmad et al. 231 Moreover, the number and length of the roads n Jakarta s relatvely small compared to the sze of Jakarta. Table 2 shows that the rato of the road to land area n Jakarta s at 7.76 percent, whch s well under the deal condtons for metropoltan ctes (e.g. London and Tokyo), where t s supposed to be at percent. The problems of nfrastructure are also characterzed by the dfferent roads capactes, causng bottleneck effects, the lack of traffc sgns, sgnals or traffc control lghts, mxed types of cargo and passenger transportaton, and damaged roads that are not mmedately repared. b. The abuse of road facltes and undscplned road users The exstence of the llegal use and abuse of road facltes, such as street vendors and llegal parkng, can decrease roads capacty. Decreasng road capacty due to sde frcton can result n the reduced performance of these roads. It s characterzed by the slowng of the flow of traffc, whch thereby extends the travel tme of the road users. The behavor of the roads users, such as pedestrans, passengers and drvers, ether n prvate or publc transportaton, can also affect the road network s performance as a whole. Volatons of the traffc rules such as mproperly crossng the road, passng through red lghts, haphazardly stoppng vehcles, and loadng/offloadng passengers at mproper places are rsky for the roads users, and lkely to cause traffc congeston. c. Insuffcent growth of road nfrastructure Data from the local transportaton agences n Jakarta state that there was an expanson of the road system n Jakarta by 159, meters (equvalent to an ncrease of 2.09 percent) durng the perod from Ths suggests that the expanson was less than 1percent per year (Jakarta Macro Transportaton Pattern, 2007). The slow road constructon, relatve to the rapd ncrease n the demand for travel, s perhaps one answer why traffc congeston has become a daly problem n Jakarta. Road constructon requres large amounts of land, whch for ctes such as Jakarta, s very dffcult to get as the prce of land s expensve and also there s resstance from the affected communtes who have to be moved away. The avalablty of substantal funds and the persuasve ablty of the local government become very mportant. Therefore, t can be expected that the constructon of new roads n urban areas such as Jakarta wll requre long perods of tme for the process of the socalzaton, plannng, and mplementaton phases. In addton, the rules and regulatons restrctng the usage of land for the constructon of new roads, such as the regulatons regardng land usage and the green area requrements, can also hamper government efforts to ncrease the road network to offset the rapd growth n the travel demand n Jakarta. d. Hgh growth rate of prvate vehcles Table 2. Road Length and Road Area Rato n Jakarta Roads Classfcaton Length (M) Area (M²) Road Area Rato Toll 112,960 2,472, % Prmary Artery 114,592 2,323, % Prmary Collector 55, , % Secondary Artery 524,411 8,443, % Secondary Collector 779,971 6,644, % Local 5,621,472 30,724, % Total 7,208,537 51,347, % Source: Calculated from data of Jakarta n Fgures 2010

13 232 Journal of Indonesan Economy and Busness September The growth rate n the number of vehcles far exceeds the growth rate of the road network n Jakarta, and s a major cause of the traffc congeston n Jakarta. In other words, the huge demand for prvate motor vehcles s not accompaned by an adequate ncrease n the road network. Ths condton s shown by the table below whch llustrates that durng the perod from , the growth n the number of motor vehcles n Jakarta averaged 9.7 percent per year. Although the growth rate had a decreasng trend durng the perod, the average growth rate n the number of vehcles n Jakarta durng that perod had ncreased compared to the average growth rate n vehcle numbers durng perod from , whch was about 6.3 percent per year. Despte the decreasng growth rate durng , motorcycles reman ranked as the transportaton mode wth the hghest growth rate among all the other transportaton modes used by road users n Jakarta. Table 3 above shows that the growth rate n motorcycles durng was always above 10 percent for each year. It also shows that there s a tendency for road users to prefer prvate motor vehcles (.e. motorcycles and passenger cars) as ther man transportaton modes. If ths trend s gong to contnue n the future, then the number of prvate motor vehcles wll contnue to grow, and experence an enormous growth n the comng years. Traffc congeston wll thus become ncreasngly severe and much more dffcult to overcome. On the other hand, the demand for travel n Jakarta has also been predcted to ncrease rapdly n the near future. Based on the study results of SITRAMP (2004), the commuter trps from Bogor-Tangerang-Jakarta-Depok to the Jakarta area reached about 76,340 trps per day n Ths number was predcted to ncrease almost ten tmes, to reach around 740,089 trps per day by The combnaton of ten-fold growth n the demand for travel, and the strong preference for prvate motor vehcles (motorcycles and passenger cars) wll eventually lead to an explosve number of prvate motor vehcles n the future. Thus, wthout makng some effort to restran the growth rate of prvate motor vehcles from now on, severe traffc congeston problems wll occur wthn the near future. Traffc congeston wll be seen almost evenly throughout all the road networks and the publc wll experence total congeston snce the exstng road networks n Jakarta would not be able to accommodate all the vehcles. 2. Descrptve Results Table 3. Number of Regstered Motor Vehcles n Jakarta, Year Motorcycles Passenger Cars Cargo Cars Buses Total Growth Rates ,518,098 2,116, , ,385 10,494, % ,765,723 2,034, , ,528 9,647, % ,974,173 1,916, , ,332 8,727, % ,310,068 1,835, , ,050 7,967, % ,647,435 1,766, , ,502 7,230,319 Source: Dtlantas Polda Metro Jaya from data of Jakarta n Fgure 2010 Year Motorcycles Growth Rates Passenger Cars Growth Rates ,518, % 2,116, % ,765, % 2,034, % ,974, % 1,916, % ,310, % 1,835, % ,647,435 1,766,801 Source: Dtlantas Polda Metro Jaya from data of Jakarta n Fgure 2010

14 2015 Harmad et al. 233 Our survey was conducted over a perod of fve days, and collected 416 samples, wth a valdty rate of 100 percent. However, for some of the nformaton collected, the valdty rate dd not reach 100 percent. For nstance, the valdty rate reached 99 percent for nformaton on alternatve transportaton modes, 97 percent for nformaton related to transportaton consderatons, and 98 percent for the nformaton about the frequency that respondents were troubled by congeston, the nformaton on the respondents opnon about congeston n Jakarta, and the nformaton on the respondents educatonal level. The sampled respondents conssted of 58.8 percent male and 41.2 percent female, whle ther ages ranged from 17 to 70 years old, and wth varous mnmum educatonal levels rangng from elementary school untl doctoral degrees. The number of respondents whose educaton level was only up to elementary level was only 1 respondent, whle 48 percent of the respondents were undergraduates. There were 22 percent and 9 percent of the respondents who had completed hgh school and dploma levels respectvely, whereas 15 percent and 2 percent of the total respondents were graduates and postgraduates. Accordng to Fgure 2 below, the man transportaton modes used by road users n Jakarta are prvate motorcycles, wth a proporton of 28 percent, and prvate passenger cars wth 23 percent. Ths mples the road users manly rely on prvate vehcles. Meanwhle, there s an alternatve and avalable transportaton mode but t s not selected as the prmary transportaton mode, namely the Metromn (publc bus) system. Only 14.9 percent of the respondents chose the Metromn as an alternatve mode of transportaton. Accordng to the SITRAMP, f there s no mprovement n publc transportaton servces, such as bus (Metromn) servces, then ts share would declne because road users would swtch ther modes of transportaton to prvate vehcles. In addton, the man attrbutes that the respondents emphaszed n selectng ther transportaton modes were the travel tme, safety, and the transportaton cost, as shown n Fgure 3. The average tme requred for respondents to travel toward Jakarta s 70.9 mnutes, despte the fact that t actually only requres 37.7 mnutes f there s no traffc congeston. Of the 416 respondents, 222 (55 percent) chose the journey tme as ther prmary consderaton n selectng ther transportaton mode. Of these 222 respondents, 110 use prvate vehcles,.e. motorcycles and prvate passenger cars. Most respondents chose prvate vehcles, especally motorcycles as ther prmary transportaton mode, because motorcycles can shorten ther travel tme. Source: based on authors calculaton Fgure 3. Import ant Attrbutes n Selectng Transportaton Modes Source:: BPS, 2010 Note: Mkrolets are small publc passenger cars run by the prvate sector to provde transportaton servces based on dfferent routes

15 234 Journal of Indonesan Economy and Busness September Furthermore, most respondents also consdered transportaton costs as an mportant factor n selectng ther transportaton modes. The amount put asde for ther transportaton costs vared across the respondents, rangng from IDR100,000 per month to IDR4 mllon per month. The respondents ncur transportaton costs of IDR654,506 per month, on average. As many as 38 percent of the prvate passenger car users are wllng to pay an addtonal transportaton cost of less than IDR100,000 per month f the government can provde better alternatve transportaton modes. On average, the respondents who are prvate passenger car users are wllng to pay another 17 percent n addtonal transportaton costs n order to avod traffc congeston n Jakarta by usng the publc transportaton systems provded by the government. In addton, 80 percent of the respondents who are motorcycle users are wllng to pay not more than IDR 100,000 n addtonal transportaton costs, but only f the government can provde better alternatve modes of transportaton. Ths addtonal cost represents ther compensaton for usng better publc transportaton modes provded by the government whch may help n reducng traffc congeston. In general, the respondents who were regular tran and bus users are also wllng to pay an addtonal transportaton cost of less than IDR 100,000 per month to avert traffc congeston n Jakarta. Fgure 4 shows that the beneft from the man transportaton modes over the alternatve modes les wth the factors of connectvty and cost. The man transportaton modes nclude prvate motorcycles and prvate passenger cars, as prevously shown n Fgure 2. In the case of motorcycles (as the most frequently used transportaton mode), the respondents do not need to swtch transportaton modes durng the journey to ther destnaton. 3. Regresson Results a. Man Effects The estmaton results for the man effects model as llustrated n the table below show that the value of the Margnal Wllngness To Pay (MWTP) for travel tme s about IDR 40,000 per mnute. Ths fgure s obtaned from the rato of the tme-savngs coeffcent to the Margnal Utlty of Income (MUI), the numerare attrbute (Y P). Ths rato shows the amount of addtonal utlty measured n terms of money. Source: based on authors calculaton Fgure 4. Comparson between Man Transportaton Mode and Alternatve Transportaton Mode Table 4. Summary of Estmaton Results wth Man Effects Varables Constant Travel tme Moderate Connectvty Excellent Connectvty Safety Numerare (Y-P) Pseudo R 2 Log Lkelhood LR Test Number of Observatons Coeffcents ** (0.113) ** (0.003) (0.046) ** (0.051) ** (0.002) ** (0.002) , Margnal WTP (ten thousands) ,663 Source: authors estmaton. Note: Values n parantheses are standard devatons. *, **, and *** ndcate statstcal sgnfcance at the 10%, 5%, and 1% respectvely. The estmaton results show a sgnfcant negatve value of the constant, of 1.626,

16 2015 Harmad et al. 235 meanng that n general, the respondents tend to choose the status quo condton rather than the offered alternatve trps. There are two possble reasons behnd ths result. Frstly, the respondents are already satsfed wth the current condtons so they refuse to choose the offered alternatve optons. Secondly, the predetermned attrbutes levels n the questonnare are so hgh, especally for the attrbute of transportaton costs, that the respondents mght tend to choose the status quo opton. Besdes, all the attrbutes except the attrbute of moderate connectvty, show sgnfcant postve values n lne wth the hypothess, whch suggests that greater postve attrbute values are preferred. In other words, the respondents prefer shorter travel tmes (.e. greater tme savngs), excellent connectvty, and also lower transportaton costs. The nsgnfcant value for the attrbute of moderate connectvty also shows that respondents prefer greater mprovements n connectvty, by reducng two transportaton modes at once. Moreover, the MWTP of IDR40,000 must be carefully nterpreted. Such values cannot be drectly nterpreted as the monetary value that Jakarta s road users put on ther travel tmes. Instead, ths estmaton model s a model that estmates preferences, thus the value of the MWTP s defned as the amount Jakarta s road users are wllng to pay to reduce ther travel tme per mnute for one trp per month. In other words, for an ndvdual wth a current travel tme of one hour, then the IDR40,000 per month s the monetary amount that he s wllng to pay to reduce hs travel tme from one hour to 59 mnutes for each trp. Hence, IDR40,000 represents hs MWTP to reduce hs travel tme. It assumes that the reason for an ndvdual to make a trp to Jakarta s for work purposes, wth an average of 25 workng days each month. Hence, there are 50 trps per month per ndvdual. Then, the value of the IDR40,000 equates to 50 mnutes of tme savngs per month or equal to IDR800 per mnute of tme savngs 2. 2 Ths assumpton s quet reasonable consderng the survey results show that more than 95 percent of respondents are gong to Jakarta for work. b. Interacton Effects In order to accommodate the effect of ncome on the utlty functon, ths study also nvolves the nteracton of all ts attrbutes along wth the respondents, who are classfed nto three ncome groups (based on ther ncome per month). These groups comprse the low-ncome group (whose ncome s less than IDR2.5 mllon), the mddle-ncome group (whose ncome ranges from IDR2.5 to 8.5 mllon), and the hgh-ncome group (whose ncome s more than IDR8.5 mllon). The estmaton result s shown n Table 4 below. The MWTP values for the attrbute of travel tme are specfcally shown n Table 3. The estmated result of the MWTP for the attrbute of travel tme s consstent wth the prevously proposed hypothess. From Table 3, t s seen that the ncome groups wth the lowest MWTP for each mnute are the low-ncome group, the mddle-ncome, and then the hghncome groups, consecutvely. As an llustraton of the jont estmaton results, the MWTP per mnute of the low-ncome group s IDR18,200. Also, the MWTP per mnute for the mddlencome group and hgh-ncome group are IDR33,800 and IDR49,500 respectvely. By usng the same analogy as n the man effects, the benefts of tme savng per mnute for the lowncome, mddle-ncome, and hgh-ncome groups are IDR364, IDR676, and IDR990 respectvely. Another attrbute, besdes the travel tme, that could also be the focus of dscusson s the attrbute of connectvty. Estmaton results show that n general, people who work n Jakarta do not just demand a moderate change n connectvty, but they tend to demand excellent connectvty. In ths case, there s no dfference n the MWTP between the ncome groups, n whch the MWTP s about IDR155,200 per month. Prvate vehcle users are more senstve to connectvty than mass/publc transportaton users. The estmaton results show that there are no attrbutes of connectvty whch are sgnfcant for the category of publc transportaton users. On the contrary, the attrbute of connectvty s sgnfcant for the users of prvate veh-