Effects of income on travel behavior have been widely examined in the literature; however, a majority of existing studies focused mainly on the direct effects of income and neglected the indirect effects. This focus is especially true in the context of developing countries in which income per capita is increasing rapidly. Effects of income on travel behavior may be observed through its impacts on other life choices. Such indirect effects are called “mediation effects” in this study. To fill the foregoing research gap, this study focused on travel mode choice in the Hanoi metropolitan area of Vietnam and developed a path model with multiple discrete choices. In the path model, mediation effects of income on travel mode choice were captured by modeling residential location choice as a discrete mediator that generated nonlinear indirect effects of income on mode choice (the proposed model is called the “mediation model”). As a comparison, a joint model of residential location and travel mode choices was built with only direct effects of income on both types of choice. Based on data collected at three new urban areas in Hanoi in 2015, model estimation results confirm the existence of both direct effects and mediation effects of income on mode choice. Simulation analyses further show that as income increases, the share of motorcycles sharply decreases up to a certain level of income; however, it rises after that level.
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