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Demand for Gasoline Is More Price-Inelastic than Commonly Thought

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Abstract

One of the most frequently examined statistical relationships in energy economics has been the price elasticity of gasoline demand. We conduct a quantitative survey of the estimates of elasticity reported for various countries around the world. Our meta-analysis indicates that the literature suffers from publication selection bias: insignificant and positive estimates of the price elasticity are rarely reported, although implausibly large negative estimates are reported regularly. In consequence, the average published estimates of both short- and long-run elasticities are exaggerated twofold. Using mixed-effects multilevel meta-regression, we show that after correction for publication bias the average long-run elasticity reaches -0.31 and the average short-run elasticity only -0.09

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  • Tomáš Havránek & Zuzana Iršová & Karel Janda, 2011. "Demand for Gasoline Is More Price-Inelastic than Commonly Thought," Working Papers IES 2011/10, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2011.
    • Handle: RePEc:fau:wpaper:wp2011_10
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    More about this item

    Keywords

    Gasoline demand; Price elasticity; Meta-analysis; Publication selection bias;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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