Effect of the Financial Crisis on Household Travel Behaviour
A Study for the Capital Area of Iceland
Anne Steinbrenner, M.Sc. in Environmental Management from ChristianAlbrechts-University of Kiel and Diplom in Landscape Architecture and
Environmental Planning, University of Applied Sciences (FH) in Bernburg,
Germany
Guðmundur Freyr Úlfarsson, Ph.D., Professor and Vice Head of the
Faculty of Civil and Environmental Engineering, University of Iceland
Trausti Valsson, Ph.D., Professor in the Faculty of Civil and Environmental
Engineering, University of Iceland
Introduction
This work studies the effects of the financial crisis in Iceland on travel behaviour and
residential choice. The study was carried out as a MS thesis (Steinbrenner, 2009) under the
advice of Profs. Guðmundur Freyr Úlfarsson and Trausti Valsson. The crisis started in
October 2008 and the study aimed to analyse its impacts and provide results and guidelines
that could be useful for the planning of urban and traffic development in the Reykjavík
Capital Area as well as in other cities hit by an economic crisis.
The objectives of the research were as follows:

Demonstration of the likely intensity of changes concerning travel behaviour

Identification of background facts that contributed to modified travel habits

Investigation of likely intensity of modified residential preferences caused by the crisis
Methodology
An online survey was used to collect data. 1,160 households answered. The study area was
the Capital Area of Iceland. Invitations were sent to the public. In this case it was mainly the
members of the University of Iceland (students and employees). Invitations were also sent to
companies and various associations. The questionnaire was divided in two parts. The first part
tried to investigate the changed situation in households. The second part gained basic
information of the households.
A statistical analysis was performed with the multinomial logit model (McFadden, 1974) for
the change in travel frequency, also on the wish to move and also on the change in the
importance of busses in the view of the participants. The modelling procedure embraced data
editing, dropping of unqualified and not statistically significant variables, tests of different
models, and the calculation of pseudo-elasticities to allow better interpretation.
Results
The findings suggest that the economic breakdown has influenced travel behaviour. Figure 1
shows the overall results for respondent’s changes in travel frequency. People claimed that by
the spring of ’09, they had reduced the number of trips since the onset of the crisis in the
autumn of 2008 to a considerable degree. In the collected data, 30% of the participants
reported to travel less often, whereas only 3% reported to travel more often. The Icelandic
Road Administration (2009) indicates a reduction of traffic in the Capital Area between June
2008 and June 2009 by 3.2%. The administration maintains that the reduction of travel to and
from workplaces is responsible for the traffic decrease.
Figure 1 Changes in travel frequency
between autumn 2008 and spring 2009.
The research results show clearly that travel frequency is linked to changes in income. People
recognize travelling as a budget item where savings can be made. It is to be expected that a
lower income is the reason for this change in travel behaviour. In fact, people with income
reduced by more than 40%, try to save money by not driving their own vehicle, or by using it
less. Instead they include more walking, biking and bus trips in their travel activities. An
increased income of more than 40% has the opposite effect, i.e. people earning much more
now than before the crisis, increased their trips; seemingly independently of the national
crisis. The probability of making more trips when people earn 40% more is much higher than
the probability of making fewer trips when people’s income are reduced by 40% or more.
Participants staying at home for working activities and unemployed people show a lower trip
frequency since the onset of the crisis in October 2008. Furthermore, they show a nearly
tripled probability to include bus services in their new travel considerations.
Another finding is that the higher the number of children at the age of 5 to 16, the lower the
probability that the members of these households do more trips. Each additional child at this
age, reduces the average change in probability of doing more trips, by around 67%.
Primarily residents in the suburbs of Reykjavík, or in the nearest suburb communities,
reduced their number of trips more than residents in Urban Reykjavík, which can be explained
by longer travel distances to workplaces and services.
The number of vehicles did not seem to change remarkably in the first six months after the
crisis. This can be explained by the difficulty of selling automobiles. The Road Traffic
Directorate (2009) reports that new registrations for vehicles has dropped by 86.6% from the
first of January 1st to 17th April 2009, compared to the same period in 2008.
The study shows that many of the dropped trips are, at least to some degree, recreational trips,
since those trips are optional.
Busses are the only public transportation mode in Reykjavík, but only 4% off all trips where
covered by bus in 2006 (Hönnun, 2006). The expectation of the increase in public bus
importance could be supported. The results indicate this, see Figure 2. We emanate, from
considering busses as more important, that people actually use this transport mode as well.
However, the more vehicles are available in the family, the less important busses are. Each
vehicle reduces the probability for considering busses as more important, by almost 80%.
Using own vehicle less often, quadruples the probability for considering the bus as a new
transport mode or a transport mode, that could be used more often. This shows that the public
bus has become a replacement for the privately own vehicle. The opposite is the case, when
people walk and bike less often. Then busses have become less important for the household,
namely almost twenty fold.
Figure 2 (((Result of the survey response
for the))) Changes in the importance of
busses
Riding busses with infants seems to be a non-desirable option. The presence of children at the
age of 0 to 4 decreases the probability of an increased bus importance, at which each child in
that age reduces the probability by around 26%.
A reduced income by 20% and more, is positively related to an increased interest in taking the
bus. Participants, whose income has been reduced by more than 40%, consider busses twice
as important. People with an income reduced by 20% to 40%, are less likely than the group
before, to consider busses as a new transportation mode. A high household income makes it
unlikely, that busses are taken more frequently.
Figure 3 shows the results for respondents wish to move. One of the strongest drivers for the
wish to move is the number of children at the age of 0 to 4. The average change in probability
for the wish to move doubles with each child.
Figure 3 The wish to move
Change in income is, as well, positively related to the wish to move, in contrast to an
unchanged income. The probability that people did consider to move, when having a different
income six months after the onset of the economic crisis, doubled.
The higher the number of household members, the less prominent the wish to move becomes.
With each additional household member, the probability of moving decreases by 24%, which
is the average change in probability across the households in the sample.
The research shows that the financial crisis in Iceland has had an influence on the travel
behaviour of households as measured six months after its onset. In fact, the reduced
purchasing power and unemployment are among the significant crisis-related causes for
changes in individual lifestyles. For example, the higher importance of busses (Figure 2), and
probably also increasing use of the public transport system at the expense of the use of
privately owned vehicles. This shows clearly the changed attitude towards travel mode choice
of the respondents.
The investigation results on the likely intensity of modified residential preferences caused by
the crisis, show that some reasons for the wish to move, might have been triggered by the
crisis. However, household characteristics are ultimately more crucial for the wish to move
than crisis related issues.
Automobile-favouring city planning has been practised in the Capital Area in the last decades,
and vehicle ownership has been steadily rising, i.e. from 1995 to 2004 by 33% (Hönnun,
2006; Reynarsson, 2001). It remains to be seen, whether vehicle ownership will continue to
grow or whether it remains at the same level, or if it shrinks. It is very likely, that the
economical upward trend in Iceland in the last two decades does not continue. Therefore it is
likely, that fewer people will own a vehicle in the near future than today. City planning in
Reykjavík and in the Capital Area needs to be adapted according to the trend that will appear
in the following months or years, especially as regards traffic management and -planning.
References
Hönnun (2006) Samgönguskipulag í Reykjavík. Fyrsti hluti: Greining á stöðu og stefnu.
Planning and Construction Department of Reykjavik City.
Icelandic Road Administration (2009) Sama umferð í ár og 2007. Fréttir. Accessed on:
http://www.vegagerdin.is/upplysingar-og-utgafa/frettir/nr/2131. Date of Reference:
04/08/2009.
McFadden, D.L. (1974) Conditional logit analysis of qualitative choice behavior. In:
Zarembka, P. (Ed.), Frontiers in Econometrics. Academic Press, New York, pp 105–142.
Reynarsson, B. (2001) Reykjavik – the Future City. Area-based initiatives in contemporary
urban policy, Danish Building and Urban Research and European Urban Research
Association, Copenhagen. Information and Development Division, Reykjavik.
Steinbrenner, A., 2009: Effect of the financial crisis on household travel behaviour. A study
for the Capital Area of Iceland. University of Iceland.
The Road Traffic Directorate (2009) Nýskráningar ökutækja enn í sögulegu lágmarki. News.
The Road Traffic Directorate, Accessed on:
http://www.us.is/Apps/WebObjects/US.woa/wa/dp?detail=6006&name=frett_ny, Date of
Reference: 27/04/2009.