JACKFAU-02-570/8
Final Report
Induced Travel Literature Review
Contract No. 68-C7-0051
Work Assignment No. 3-08
Prepared for:
The United States Environmental Protection Agency
Prepared by:
Sierra Research
1801 J Street
Sacramento, CA 95814
and
Jack Faucett Associates
3685 Mt. Diablo Boulevard, Suite 251
Lafayette, CA 94549
April 22, 2002
JACK FAUCETT ASSOCIATES
WESTERN REGIONAL OFFICE
3685 MT. DIABLO BOULEVARD • SUITE 25 1
LAFAYETTE, CALIFORNIA 94549
MARYLAND	•	CALIFORNIA

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I
JACKFAU-02-570/8


Final Report


Induced Travel Literature Review


Contract No. 68-C7-0051
Work Assignment No. 3-08


9 Prepared for:
The United States Environmental Protection Agency


Prepared by:
Sierra Research
1801 J Street
Sacramento, CA 95814


and
y

Jack Faucett Associates
3685 Mt. Diablo Boulevard, Suite 251
Lafayette, CA 94549
w*




April 22, 2002





JACK FAUCETT ASSOCIATES
WESTERN REGIONAL OFFICE
3685 MT. DIABLO BOULEVARD ° SUITE 251
LAFAYETTE, CALIFORNIA 94549
MARYLAND • CALIFORNIA

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TABLE OF CONTENTS
1	INTRODUCTION		1
2	INDUCED DEMAND DEFINED	2
3	WHAT INFLUENCES DEMAND FOR TRAVEL?	4
4	THE ISSUE: WHAT'S AT STAKE?	6
5	THE EMPIRICAL EVIDENCE	7
6	NEXT STEPS FOR ACCOUNTING FOR INDUCED DEMAND FOR TRAVEL IN
FORECAST MODELS	9
7	CONCLUSION			11
REFERENCES			12

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1 a INTRODUCTION
This paper reviews the studies of induced demand for travel that have been carried out to date.
These studies indicate that induced demand for travel is a real phenomenon and needs to be
better accounted for in transportation planning models forecasting levels of congestion and air
quality and land use impacts. The interconnectivity between highways, land use and air quality
is increasingly being recognized by local, regional, state and federal agencies. However,
research indicates that current models fail to recognize the complexity of this interconnection and
often underestimate expected levels of congestion and air pollution.
As researchers, policymakers, public officials and the public-at-large struggle to understand the
relationship between transportation development, land use, and quality of life changes for the
affected areas, induced travel demand emerges as one of the most contentious issues.
Understanding what the research says about this phenomenon is critical to making the best
possible transportation infrastructure investments.
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2 INDUCED DEMAND DEFINED
Noland and Lem (2001) define induced demand for travel to be any increase in vehicle miles
traveled (VMT) attributable to any transportation project that increases capacity. For the purpose
of this review, this definition will be used.
Basic economic theory can be used to explain the concept of induced demand. For any good,
there are short- and long-run supply and demand curves; the point at which these curves intersect
is the point of consumption. In this case, the good is travel; supply is the amount of roadway and
demand is for use of these roads. The demand for motor vehicle travel is determined by a
number of factors. Like any other good, the cost of these factors is reflected in a price. The price
of travel includes the capital cost of a vehicle, vehicle maintenance, fuel and time. The time cost
is considered to be the most significant factor related to induced travel (Noland, forthcoming).
Any increase in the supply of roadway reduces the time cost of travel, all else being equal. This,
conceptually, makes sense: adding an additional lane to a highway reduces congestion and allows
travelers to reach their destinations more quickly. As more users take advantage of this supply
and the system becomes more congested, however, the price (or travel time) for each user
increases until it plateaus at an equilibrium point between supply and demand. In the case of
public mass transportation systems, a different supply curve applies due to "economies of scale".
This means that as more users take advantage of the public transit systems there is a reduction in
cost (or travel time) because the system becomes more viable and services can be run more
frequently.
In terms of the basic supply and demand graph, a roadway addition or improvement shifts the
upward-sloping supply curve outwards, or to the right, seen in Figure 1 as the shift from S, to S2.
The original point of consumption, or equilibrium point, was Q0. After the addition of new
roadway, the point of consumption is Q,. The new supply can provide more of the good at a
lower cost. Given the same short-run demand curve (DJ, a greater quantity will be demanded
(Qt). The long-run demand curve seen in Figure 1 (DLR) has a more gradual slope. Over time,
the short-run demand curve shifts outward to. the point where the DLR and S2 intersect.
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Price
(User
Cost)
Po
P
Quantity
(Volume of Trips)
Figure 1: Demand for trip-making in relation to cost (Lee 1999)
and effect of capacity improvement
This model assumes no increase in demand spurred by a number of exogenous factors as is the
case in the real world. Exogenous factors are independent of the transportation system itself and
include population growth, increased incomes, increased vehicle ownership, increased numbers
of women in the workplace and other demographic characteristics. These factors lead to an even
greater demand for travel. In modeling projected demand on a particular facility, it is extremely
difficult to tease out the exogenous factors to measure the exact magnitude of induced demand.
That is to say, of the increased quantity of demand for travel over time, it is difficult to calculate
how much of that increase is a direct result of construction of the transportation facility itself and
NOT of any other of the aforementioned exogenous factors. Determining the magnitude of
induced demand and accounting for it in projection models remains the challenge to
transportation planning experts.
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3 WHAT INFLUENCES DEMAND FOR TRAVEL?
For every action, there is a reaction. People change their behavior in response to reduced travel
costs. Behavioral changes occur on two levels: short- and long-term. Many short-term changes
in and of themselves do not yield additional VMT directly, but can yield increased VMT in the
long-term. Demand for travel is a derived demand, meaning it stems from other economic
activity and thus is assumed fixed in the short-run (Lee et al., 1998). Simply stated, economists
assume people do not travel for the sake of traveling but in order to achieve some other objective.
Both short- and long-term individual behavioral and developmental changes drive the demand
for travel. In the short-term, which can be defined as the period during which households'
residential locations and the spatial distribution of economic activity remain fixed (Pickrell,
2001), a transportation development that leads to reduced travel costs can encourage individuals
to make longer trips, or provide a disincentive for individuals to combine trips they had
combined before. In the long-term, transportation development often encourages land and other
infrastructure development. Transportation projects that make historically un- or
underdeveloped areas more accessible reduce travel costs and make the area a viable site for
economic/urban development. Subsequently, two things can happen: (1) individuals relocate to
these more suburban areas and (2) businesses move to the new suburbs as suburban executive
parks are developed. Both these activities have the potential to lead to longer commute distances
and decreased mass transit use (due to the absence of major mass transit systems in suburban
areas, particularly newly developed suburban areas). Further, normal daily activities, such as
shopping, often require motor vehicle use because these newly developed areas are usually
served by "big box" retail developments, accessible almost exclusively by private motor vehicle.
So despite the increased transportation system's capacity, traffic often returns to the level of
congestion it was before the transportation improvement. Downs (1992) developed a theory of
"triple convergence" to explain the difficulty of removing peak-hour congestion from highways
in the short-term. Hills (1996) and Litman (forthcoming) point to these same behavioral
changes. These experts contend that individuals respond to capacity improvement immediately
in three ways that contribute to continued congestion: (1) changing the time of their departure in
switching from non-peak to peak hour travel; (2) switching travel routes to take advantage of
added capacity on the improved roadway; and (3) switching from alternative transportation
modes to private vehicle transit. Individuals may also shift their destination entirely. For
example, instead of shopping at the local hardware store, an individual might now find it cost-
effective to drive further to shop at a national chain store. While a traveler may not increase
individual VMT by adjusting departure times or selecting a different travel route, the changed
behavior will likely have secondary effects that will lead to increased VMT in the aggregate.
The off-peak traveler that switches to peak travel time reduces congestion during off-peak travel
times. This may induce other travelers to make new trips during the off-peak period since the
travel cost during this time is now less. The same is true in the second scenario where an
individual switches routes. That is, the original route of the individual who shifted routes is now
less congested, reducing the travel cost for others and inducing additional trips along the original
route.
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Table 1: Short Term Behavioral Changes that Promote Continued Traffic on Improved
Transportation Facilities
Rescheduled Trips
Adjusting departure times in response to facility improvement,
spreading or contracting peak hour travel on the facility.
Changed Routes
Diverting from previous route to improved facility.
Mode Shift
Switching to new modes of transport because of improved facility (in
this context, refers to shifts from public or alternative transit modes to
private passenger vehicle).
Destination Shift
Altering destination because of facility improvement.
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4 THE ISSUE: WHAT'S AT STAKE?
Federal, state and local governments spend billions each year on transportation improvements
(Dowling & Colman, 1998) with objectives that include reducing congestion, facilitating
economic growth, and improving air quality and travel safety. These objectives are not always
achieved, since models are failing to accurately project the true impact of a transportation
infrastructure project. This is in part due to the inability of models to accurately account for
induced demand.
The 1990 Clean Air Act Amendments (CAAA) indirectly mandate that metropolitan planning
organizations' (MPO) and state Department of Transportations' (DOT) account for the effects of
induced demand in analyses of transportation projects. Agencies must develop a State
Implementation Plan (SIP), which includes forecasting future emissions, to meet CAAA
requirements. If a state or metropolitan area is out of attainment, CAAA prohibits use of Federal
transportation funds for transportation projects that worsen air quality (Dowling & Colman,
1998). This presents MPOs and states with the challenge of forecasting the level of reduced
emissions achieved in part through highway expansion that reduces driver speed variations (stop-
and-go driving) and the level of additional emissions stemming from induced demand and other
endogenous and exogenous factors leading to continued or worsened congestion.
The travel demand forecasting models used to meet the CAAA mandate are becoming
increasingly sophisticated yet leave much to be desired in terms of accurate estimates. Recent
studies find that forecasts of highway capacity and projections made on travel on a particular
transportation facility underestimate the level of usage the facility actually sees once developed
(see, for example, SACTRA, 1994).
The issue at hand is no longer whether induced demand exists, as recent studies (see, for
example, Fulton et al, 1999; Hansen & Huang, 1997; SACTRA, 1994) find that it does. The
issue now is determining its magnitude and methods of accounting for the phenomenon in
practice. The projected benefits of a project - reduced travel times, improved air quality - can
be tempered by induced demand (Noland & Cowart, 1999). Many highway projects are justified
by estimates of congestion reduction (Rodier et al, 2001). If induced demand is not appropriately
factored into the analysis, then the benefits of the project may be overstated and the benefits of
alternatives to highway expansion, such as auto pricing and mass transit, may be underestimated
(Rodier et al., 2001). The problem is that it is still unclear what the "appropriate" factor is for
incorporating the effects of induced demand into travel forecasting models. The next section
reviews the most recent research on this issue.
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5 THE EMP98*aCAL EVIDENCE
Research on induced demand has been conducted for decades. Historic research has focused on
establishing the existence of induced demand; contemporary research focuses on the magnitude
of this real phenomenon. A pivotal point in the history of this research was the United Kingdom
release of the Standing Advisory Committee on Trunk Road Assessment's (SACTRA) report,
Trunk Roads and The Generation of Traffic (1994). This report highlighted the weaknesses of
then-current forecasting procedures, reviewing traffic in specific corridors that had capacity
increased. The review showed that traffic grew at an unexpectedly high rate. The SACTRA
postulated that this growth was not due entirely to exogenous factors such as increased income or
GDP and concluded that induced travel is a "real phenomenon" and can affect the economic
evaluation of a transportation project. -That is, induced demand for travel matters. A number of
studies in the United States also demonstrate that induced travel is real and that current
forecasting models do not accurately account for it (see for example, Rodier et al., 2001).
The Transportation Research Board reported in 1995 that most modeling procedures do not
adequately capture induced travel effects. Hansen et al. (1993) and Hansen & Huang (1997),
among others, have used econometric techniques to demonstrate the statistical significance of the
induced demand phenomenon and to quantify its magnitude. These and other studies yield a
range of values for the short- and long-term effects of induced demand for travel as it relates to
increased roadway capacity, measured in terms of elasticity of demand.
Economists use the term "elasticity of demand" to refer to the percentage change in quantity
demanded for a good divided by the percentage change in price. For example, an elasticity of
demand of .2 means that for a 1 % decrease in price, there is a .2% increase in quantity
demanded. If the short-run demand elasticity for travel is zero, or inelastic, then traffic volumes
are unresponsive to changes in price and the demand curve is vertical. Even if the cost of travel
changes, individuals will not change their behavior in response to the price change. In general,
short-run demand elasticity for travel is less elastic than the long-run demand elasticity. This
makes sense as individuals can do. more to change their behavior over the long-run and thus have
a greater impact on the total quantity demanded than they can in the short run. For example, if
gas prices increase significantly, individuals cannot respond immediately in as drastic a way as
they can in the long run as they still need to drive to do the things they did before the price
increase. In the long-run, however, they may make behavioral changes, such as switch to public
transportation, move to a location closer to work, or purchase a more fuel-efficient vehicle, to
lower their fuel consumption.
A universal value for short- and long-run elasticities will be difficult, to establish because of the
individual characteristics (e.g. income, comprehensiveness of mass transit systems) of a given
area. Further, the studies done to date have used different methodologies and data sources, and
examined different time periods and area scales (county, metro area, state) so that the
extrapolation of a single elasticity factor for travel demand is seemingly impossible. However, a
general range of values has emerged from studies. This range can be useful for forecasting
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models where analysts can perform sensitivity analysis demonstrating how sensitive the net
benefit of a project is to manipulation of the induced travel factor.
The following are studies finding that increased capacity leads to increased traffic:
Table 2: Elasticities of Travel Demand with respect to Lane-Miles of Roadway


Elasticities
Study
Scale
Short-run
Long-run
Cervero and Hansen, 2000
County
0.6

Fulton, Meszler, Noland and Thomas, 2000
County
0.1-0.4
0.5-0.8
Hansen and Huang , 1997
County
0.3-0.7
0.6-0.7
Rodier et al., 2001
Metropolitan Area
0.8
1.1
Noland and Cowart, 2000
Metropolitan Area
0.6-0.8
0.8-1.0
Hansen and Huang, 1997
Metropolitan Area
0.5-0.9
0.9
Johnston and Ceerla, 1996
Metropolitan Area

0.6-0.9
Noland, 2001
State
0.3-0.6
0.7-1.0
All these studies find that induced travel demand plays a significant role. Provide additional
roadway and people will alter the behavior and drive more. In particular, people respond by
changing their preferences, and thus development patterns. Boarnet and Chalermpong found in a
study of an Orange County toll road network that "new highways change the geographic pattern
of accessibility, that those changes are reflected in [increased] home sales prices, and thus that it
is reasonable to conclude that new highways will also create changes in development patterns"
(2000). These changes in development patterns influence induced traffic.
While there are limitations to the conclusions that can be definitively drawn from any one study
because of the limitations of the datasets used for each study, the cumulative assessment of
studies in this area suggest one thing: the impact of induced demand is considerable and can be
seen through a number of measures.
An intensive review of the relevant literature in the United Kingdom and United States (Noland
& Lem, 2002) concludes that the theory of induced travel "can certainly not be refuted and is
largely confirmed." Noland (2001) estimates that 28% of annualized growth of VMT is due to
induced travel. Heanue (1998) determines that between 6-22% of VMT growth is due to
capacity additions. The question now is how to incorporate this body of knowledge into practice.
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6 NEXT STEPS FOR ACCOUNTING FOR INDUCED TRAVEL DEMAND
UN FORECAST MODELS
The studies cited in the last section offer direction for future action. It seems that several points
should be kept in mind:
• Regardless of the scale of the project (county, metropolitan area, state), project
evaluation must consider induced demand. Forecasting models must include some
measure of transportation infrastructure capacity as a determining factor in estimating
VMT growth.
® The long-run impact of induced demand is greater than the short-run. Constructing
models that incorporate the "lag effect" of travel demand is necessary.
The U.S. Department of Transportation has only recently incorporated induced travel demand in
its forecasting model, the Highway Economic Requirements System model (1999). Previously,
demand relationships were assumed to be entirely exogenous, unaffected by infrastructure
improvement. In its current form, it simulates changes in the demand for travel in response to
shifts in the condition and capacity of individual sections. The model uses a short-run (five-year
period) travel demand elasticity of 1.0 and a long-run elasticity of 1.6 with respect to total user
costs. The model no longer treats each section in isolation; rather it is intended to simulate
equilibrium effects in the network.
Rodier et al. examined the potential importance of land use and induced travel effects in the
Sacramento, California region using the integrated land use and transportation model, MEPLAN
(2001). The model simulates a future base case scenario (low-build) and a beltway scenario for
25- and 50-year horizons. Rodier et al. constructed scenarios to represent methods of operating
travel demands models to capture induced travel effects. The study found that when land use
effects, and land use and trip distribution effects were not represented, there were large errors in
the estimation of increased VMT and emissions. These errors were so large that they changed
the rank ordering of the scenarios based on their net benefits. This study demonstrates the
significance of incorporating induced travel effects into regional travel demand models as the
Sacramento MEPLAN model does (and many other models do not, see for example, Rodier &
Johnston, 2000) to more accurately estimate the effect of transportation infrastructure expansion
and the.related environmental costs.
U.S. transportation policy has long been focused on reducing congestion by increasing capacity.
The effects of induced demand suggest that this focus will never be successfully achieved
(Noland & Cowart, 2000). That induced travel is a real and significant factor, transportation
projects appear to be less about reducing traffic congestion as they are about directing the growth
of urbanized areas (Noland & Lem, 2002). Increasing capacity should not be considered
negatively in light of induced travel effects; there are many benefits to increased capacity
including increased access and mobility and the associated-potential increase in quality of life.
However, transportation planners and policymakers alike must consider these benefits against the
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costs of the project, costs that must include induced demand effects in order to account for the
secondary effects of induced demand, including changes in land use (Rodier et al, 2001).
Project analysis that values lowered travel costs or improved air quality without accounting for
induced travel effects are inadequate in providing for informed decision-making. Fortunately,
forecasting and modeling is moving towards a more precise estimation of travel demand thanks
to recent research and Federal mandates to conform to CAAA requirements and to review the
environmental impact of Federal projects by the Environmental Protection Agency, as mandated
by the National Environmental Policy Act (NEPA) of 1970. The Environmental Protection
Agency is also working through its regional offices to assist state transportation agencies and
MPOs in improving project level analyses to meet Federal environmental statutes. These statutes
are encouraging more comprehensive project assessments and proving to be an effective vehicle
for improved policy and project selection (Noland & Lem, 2001).
The existing highway finance process may in itself discourage complete quantification of the
social costs of highway construction realized through induced demand for travel. Since many
projects are financed largely by state and federal funds, local governments can export a large
share of a project's cost to the state and federal government, effectively buying local gains with
money that comes from other areas. Ideally, the area that benefits from a project would also
incur the costs, encouraging a more comprehensive itemization of costs and benefits (Boarnet
and Haughwout, 2000). Pickrell also concludes that a primary reason for the underestimation of
project costs is the large portion of project funds that come from state and federal-sources (1992).
Though Pickrell's analysis focused on rail transit projects, the analogous funding system creates
the potential for similarly poor highway project assessment (Boarnet and Haughwout, 2000).
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7 CONCLUSaONS
The evidence indicates that improved forecasting models that account for the effect of induced
demand for travel will provide for the potential to make better policy decisions regarding
transportation development and land use. Also, further research on the highway construction
funding system ought to be pursued to assess the potential of the current system to encourage the
underestimation of project costs.
It is promising that there is a concerted effort to incorporate induced travel effects into
transportation forecasting models. As forecasting models continue to be improved and decision
makers become increasingly cognizant of the relationship between transportation capacity,
behavioral responses and land use patterns, U.S. transportation planning can enter a new era that
holds great promise for being more informed and thus more able to improve the general quality
of life.
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REFERENCES
Boarnet, Marlon G. and Andrew F. Haughwout, 2000, "Do highways matter? Evidence and
policy implications of highways' influence on metropolitan development", Discussion paper
prepared for the Brookings Institution Center on Urban and Metropolitan Policy. August 2000.
Boarnet, Marlon G. and Saksith Chalermpong, 2000, "New Highways, Urban Development and
Induced Travel", Institute of Transportation Studies, University of California, Irvine, CA.
Cervero, Robert and Mark Hansen, 2000, "Road Supply-Demand Relationships: Sorting Out
Causal Linkages", Institute of Transportation Studies, University of California, Berkeley, CA.
Dowling, Richard G. and Steven B. Colman, 1998, "Effects of increased highway capacity:
results of a household travel behavior survey", Transportation Research Circular No. 481.
Transportation Research Board and National Research Council.
Downs, Anthony, 1992. Stuck in Traffic: Coping with Peak-Hour Traffic Congestion, The
Brookings Institution: Washington, DC.
Fulton, Lewis M., Robert B. Noland, Daniel J. Meszler and John V. Thomas, 2000, "A Statistical
Analysis of Induced Travel Effects in the U.S. Mid-Atlantic Region", Journal of Transportation
and Statistics, 3(1): 1-14.
Hansen, Mark, David Gillen, Allison Dobbins, Yuanlin Huang and Mohnish Puvathingal, 1993,
"The air quality impacts of urban highway capacity expansion: traffic generation and land use
change." Institute of Transportation Studies, University of California, Berkeley.
Hansen, Mark and Yuanlin Huang, 1997, "Road Supply and Traffic in California Urban Areas",
Transportation Research A, 13: 205-218.
Heanue, Kevin, 1998, "Highway Capacity and Induced Travel: Issues, Evidence and
Implications", Transportation Research Circular, no. 481, Transportation Research Board,
National Research Council.
Hills, Peter J., 1996, "What is induced traffic?" Transportation, 23: 5-16.
Johnston, Robert A. and Raju Ceerla, 1996, "The effects of new high-occupancy vehicle lanes on
travel and emissions", Transportation Research A 30:1.
Lee, Douglass B., Lisa A. Klein and Gregorio Camus, 1998, "Induced Traffic and Induced
Demand in Benefit-Cost Analysis", US Department of Transportation Volpe National
Transportation Systems Center, Cambridge, MA.
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Litman, Todd, 2001, Generated Traffic: Implications for Transport Planning, ITE Journal, 71(4):
38-47.
Noland, Robert B. and Lewison L. Lem, 2002, "A Review of the Evidence for Induced Travel
and Changes in Transportation and Environmental Policy in the United States and the United
Kingdom." Transportation Research D, 7(1): 1-26.
Noland, Robert B., 2001 "Relationships between Highway Capacity and Induced Vehicle
Travel", Transportation Research A, 35(1): 47-72.
Noland, Robert B. and William A. Cowart, 2000, "Analysis of Metropolitan Highway Capacity
and the Growth in Vehicle Miles of Travel", Transportation, 27(4): 363-390.
Pickrell, Don, 1992, "A desire named streetcar - fantasy and fact in rail transit planning",
Journal of the American Planning Association, 58,2.
Pickrell, Don, 2001, "Induced demand: its definition, measurement and significance", Eno
Transportation Foundation Policy Forum, Washington DC.
Rodier, Caroline J. and Robert A. Johnston, 2000, "Preliminary Comments on the Wasatch Front
Regional Council Travel Demand Model Improvements for Friends of Great Salt Lake", Future
Moves, Great Salt Lake Audobon Society, HawkWatch International, League of Women Voters
of Salt Lake, and Sierra Club Utah Chapter.
Rodier, Caroline J., John E. Abraham and Robert A. Johnston, 2001, "Anatomy of Induced
Travel Using An Integrated Land Use and Transportation model in the Sacramento Region",
Preprint for the 79th Annual Meeting of the Transportation Research Board.
Standing Advisory Committee on Trunk Road Assessment, 1994, "Trunk Roads and the
Generation of Traffic", Department of Transport, London.
Transportation Research Board, 1995, "Expanding Metropolitan Highways: Implications for Air
Quality and Energy Use", Special report 245, National Research Council, National Academy
Press, Washington, DC.
United States Department of Transportation, Federal Highway Administration, 1999, "The
Highway Economic Requirements System Model: Current Methods of Analysis and
Opportunities for Improvement"
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