IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v165y2022icp38-53.html
   My bibliography  Save this article

Your mileage may vary: Have road-fuel demand elasticities changed over time in middle-income countries?

Author

Listed:
  • Liddle, Brantley
  • Hasanov, Fakhri J.
  • Parker, Steven

Abstract

This paper determines whether road-fuel (gasoline plus diesel) income and price elasticities have changed over time in middle-income countries. To do so, the paper considers a balanced panel of 26 countries that spans 1990–2019. Also, the paper employs two methods that fully allow for cross-sectional heterogeneity, but vary to the extent that they allow for temporal heterogeneity: rolling window, mean group regressions and mean observation OLS, which estimates coefficients for each cross-section and each time period. While the elasticities demonstrate some temporal heterogeneity, such variances are less pronounced than the corresponding country-level heterogeneity. At any point in time, for middle-income countries, the average road-fuel income elasticity is between 1 and 0.8, and the average road-fuel price elasticity is very near −0.2. Lastly, we find no strong evidence that road-fuel demand has become saturated or that efficiency improvements have made consumers less price sensitive in middle-income countries.

Suggested Citation

  • Liddle, Brantley & Hasanov, Fakhri J. & Parker, Steven, 2022. "Your mileage may vary: Have road-fuel demand elasticities changed over time in middle-income countries?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 165(C), pages 38-53.
    • Handle: RePEc:eee:transa:v:165:y:2022:i:c:p:38-53
    DOI: 10.1016/j.tra.2022.08.024
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856422002282
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2022.08.024?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
    2. Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "A meta-analysis on the price elasticity of energy demand," Energy Policy, Elsevier, vol. 102(C), pages 549-568.
    3. Dargay, Joyce & Gately, Dermot, 1997. "The demand for transportation fuels: Imperfect price-reversibility?," Transportation Research Part B: Methodological, Elsevier, vol. 31(1), pages 71-82, February.
    4. Bureau, Benjamin, 2011. "Distributional effects of a carbon tax on car fuels in France," Energy Economics, Elsevier, vol. 33(1), pages 121-130, January.
    5. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    6. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    7. Timothy Neal & Michael Keane, 2020. "Climate Change and U.S. Agriculture: Accounting for Multi-dimensional Slope Heterogeneity in Production Functions," Discussion Papers 2018-08a, School of Economics, The University of New South Wales.
    8. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    9. Liddle, Brantley & Parker, Steven, 2022. "One more for the road: Reconsidering whether OECD gasoline income and price elasticities have changed over time," Energy Economics, Elsevier, vol. 114(C).
    10. Jeyhun I. Mikayilov & Shahriyar Mukhtarov & Jeyhun Mammadov, 2020. "Gasoline Demand Elasticities at the Backdrop of Lower Oil Prices: Fuel-Subsidizing Country Case," Energies, MDPI, vol. 13(24), pages 1-18, December.
    11. Jin, Sainan & Miao, Ke & Su, Liangjun, 2021. "On factor models with random missing: EM estimation, inference, and cross validation," Journal of Econometrics, Elsevier, vol. 222(1), pages 745-777.
    12. M. Hashem Pesaran, 2015. "Testing Weak Cross-Sectional Dependence in Large Panels," Econometric Reviews, Taylor & Francis Journals, vol. 34(6-10), pages 1089-1117, December.
    13. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    14. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
    15. Hsing, Yu, 1990. "On the variable elasticity of the demand for gasoline : The case of the USA," Energy Economics, Elsevier, vol. 12(2), pages 132-136, April.
    16. Isabel Casas & Jiti Gao & Bin Peng & Shangyu Xie, 2021. "Time‐varying income elasticities of healthcare expenditure for the OECD and Eurozone," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(3), pages 328-345, April.
    17. Chudik, Alexander & Pesaran, M. Hashem, 2015. "Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors," Journal of Econometrics, Elsevier, vol. 188(2), pages 393-420.
    18. Liu, Weiwei, 2014. "Modeling gasoline demand in the United States: A flexible semiparametric approach," Energy Economics, Elsevier, vol. 45(C), pages 244-253.
    19. Neto, David, 2012. "Testing and estimating time-varying elasticities of Swiss gasoline demand," Energy Economics, Elsevier, vol. 34(6), pages 1755-1762.
    20. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    21. Michael Keane & Timothy Neal, 2020. "Climate change and U.S. agriculture: Accounting for multidimensional slope heterogeneity in panel data," Quantitative Economics, Econometric Society, vol. 11(4), pages 1391-1429, November.
    22. Dahl, Carol A., 2012. "Measuring global gasoline and diesel price and income elasticities," Energy Policy, Elsevier, vol. 41(C), pages 2-13.
    23. Gao, Jiti & Peng, Bin & Smyth, Russell, 2021. "On income and price elasticities for energy demand: A panel data study," Energy Economics, Elsevier, vol. 96(C).
    24. Amin Karimu, 2014. "Impact of economic and non-economic factors on gasoline demand: a varying parameter model for Sweden and the UK," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(4), pages 445-468, December.
    25. Brantley Liddle and Hillard Huntington, 2020. "Revisiting the Income Elasticity of Energy Consumption: A Heterogeneous, Common Factor, Dynamic OECD & non-OECD Country Panel Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 207-230.
    26. Karavias, Yiannis & Tzavalis, Elias, 2014. "Testing for unit roots in short panels allowing for a structural break," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 391-407.
    27. Yalta, A. Talha & Yalta, A. Yasemin, 2016. "The dynamics of fuel demand and illegal fuel activity in Turkey," Energy Economics, Elsevier, vol. 54(C), pages 144-158.
    28. Kenneth B. Medlock III & Ronald Soligo, 2001. "Economic Development and End-Use Energy Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 77-105.
    29. Rossana Galli, 1998. "The Relationship Between Energy Intensity and Income Levels: Forecasting Long Term Energy Demand in Asian Emerging Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 85-105.
    30. Hillard G. Huntington, 1994. "Oil Price Forecasting in the 1980s: What Went Wrong?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
    31. Park, Sung Y. & Zhao, Guochang, 2010. "An estimation of U.S. gasoline demand: A smooth time-varying cointegration approach," Energy Economics, Elsevier, vol. 32(1), pages 110-120, January.
    32. Dermot Gately, 1992. "Imperfect Price-Reversibility of U.S. Gasoline Demand: Asymmetric Responses to Price Increases and Declines," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 179-208.
    33. Liddle, Brantley & Huntington, Hillard, 2020. "‘On the Road Again’: A 118 country panel analysis of gasoline and diesel demand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 142(C), pages 151-167.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liddle, Brantley, 2023. "Is timing everything? Assessing the evidence on whether energy/electricity demand elasticities are time-varying," Energy Economics, Elsevier, vol. 124(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liddle, Brantley & Parker, Steven, 2022. "One more for the road: Reconsidering whether OECD gasoline income and price elasticities have changed over time," Energy Economics, Elsevier, vol. 114(C).
    2. Liddle, Brantley, 2023. "Is timing everything? Assessing the evidence on whether energy/electricity demand elasticities are time-varying," Energy Economics, Elsevier, vol. 124(C).
    3. Liddle, Brantley & Huntington, Hillard, 2020. "‘On the Road Again’: A 118 country panel analysis of gasoline and diesel demand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 142(C), pages 151-167.
    4. Liddle, Brantley & Smyth, Russell & Zhang, Xibin, 2020. "Time-varying income and price elasticities for energy demand: Evidence from a middle-income panel," Energy Economics, Elsevier, vol. 86(C).
    5. Wang, Banban & Wei, Jie & Tan, Xiujie & Su, Bin, 2021. "The sectorally heterogeneous and time-varying price elasticities of energy demand in China," Energy Economics, Elsevier, vol. 102(C).
    6. Brantley Liddle, 2022. "What Is the Temporal Path of the GDP Elasticity of Energy Consumption in OECD Countries? An Assessment of Previous Findings and New Evidence," Energies, MDPI, vol. 15(10), pages 1-12, May.
    7. Liddle, Brantley & Parker, Steven & Hasanov, Fakhri, 2023. "Why has the OECD long-run GDP elasticity of economy-wide electricity demand declined? Because the electrification of energy services has saturated," Energy Economics, Elsevier, vol. 125(C).
    8. Brantley Liddle & Fakhri Hasanov, 2022. "Industry electricity price and output elasticities for high-income and middle-income countries," Empirical Economics, Springer, vol. 62(3), pages 1293-1319, March.
    9. Ghoddusi, Hamed & Morovati, Mohammad & Rafizadeh, Nima, 2022. "Dynamics of fuel demand elasticity: Evidence from Iranian subsidy reforms," Energy Economics, Elsevier, vol. 110(C).
    10. Gao, Jiti & Peng, Bin & Smyth, Russell, 2021. "On income and price elasticities for energy demand: A panel data study," Energy Economics, Elsevier, vol. 96(C).
    11. Liddle, Brantley & Huntington, Hillard, 2021. "How prices, income, and weather shape household electricity demand in high-income and middle-income countries," Energy Economics, Elsevier, vol. 95(C).
    12. Shaw, Charles, 2020. "Econometric Analysis of Demand for Petrol in India, 1966-2019," MPRA Paper 104797, University Library of Munich, Germany.
    13. Laurence Levin & Matthew S. Lewis & Frank A. Wolak, 2017. "High Frequency Evidence on the Demand for Gasoline," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 314-347, August.
    14. Liddle, Brantley & Sadorsky, Perry, 2020. "How much do asymmetric changes in income and energy prices affect energy demand?," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    15. Dilaver, Zafer & Hunt, Lester C., 2021. "Modelling U.S. gasoline demand: A structural time series analysis with asymmetric price responses," Energy Policy, Elsevier, vol. 156(C).
    16. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    17. Quynh Chau Pham Holland & Benjamin Liu & Eduardo Roca, 2019. "International funding cost and heterogeneous mortgage interest-rate pass-through: a bank-level analysis," Empirical Economics, Springer, vol. 57(4), pages 1255-1289, October.
    18. Huntington, Hillard & Liddle, Brantley, 2022. "How energy prices shape OECD economic growth: Panel evidence from multiple decades," Energy Economics, Elsevier, vol. 111(C).
    19. Melo, Patricia C. & Ramli, Ahmad Razi, 2014. "Estimating fuel demand elasticities to evaluate CO2 emissions: Panel data evidence for the Lisbon Metropolitan Area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 30-46.
    20. Elisabet Rodriguez Llorian & Janelle Mann, 2022. "Exploring the technology–healthcare expenditure nexus: a panel error correction approach," Empirical Economics, Springer, vol. 62(6), pages 3061-3086, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:165:y:2022:i:c:p:38-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.