Trip generation models with permanent unobserved effects

The objective of this paper is to examine whether the use of conventional trip generation models based on cross-sectional data will produce biased results. Panel data are used to control for omitted time invariant household effects. The methodology is based upon fixed and random effects models. The results indicate that cross-sectional models for total tripmaking, transit and car usage may lead to seriously misleading results if used to assess the effects of changes in the travel environment. The methodology seems to provide a proper way of taking unobserved heterogeneity into account. The difference in the results between fixed and random effects models may be the result of correlation between the omitted and included explanatory variables. A test for measurement error in the explanatory variables suggests that the results will not be significantly affected by this problem.