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Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect

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Author Info
Kenneth A. Small () (Department of Economics, University of California-Irvine)
Kurt Van Dender () (Department of Economics, University of California-Irvine)

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Abstract

We estimate the rebound effect for motor vehicles, by which improved fuel efficiency causes additional travel, using a pooled cross section of US states for 1966-2001. Our model accounts for endogenous changes in fuel efficiency, distinguishes between autocorrelation and lagged effects, includes a measure of the stringency of fuel-economy standards, and allows the rebound effect to vary with income, urbanization, and the fuel cost of driving. At sample averages of variables, our simultaneous-equations estimates of the short- and long-run rebound effect are 4.5% and 22.2%. But rising real income caused it to diminish substantially over the period, aided by falling fuel prices. With variables at 1997-2001 levels, our estimates are only 2.2% and 10.7%, considerably smaller than values typically assumed for policy analysis. With income at the 1997 – 2001 level and fuel prices at the sample average, the estimates are 3.1% and 15.3%, respectively.

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Publisher Info
Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050603.

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Length: 46 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:irv:wpaper:050603

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Postal: Irvine, CA 92697-3125
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Related research
Keywords: Carbon dioxide; Fuel economy; Travel demand; Motor vehicle use; Rebound effect;

Find related papers by JEL classification:
Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
D5 - Microeconomics - - General Equilibrium and Disequilibrium
R4 - Urban, Rural, and Regional Economics - - Transportation Systems
C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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References listed on IDEAS
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  1. David L. Greene, 1992. "Vehicle Use and Fuel Economy: How Big is the "Rebound" Effect?," The Energy Journal, International Association for Energy Economics, vol. 13(1), pages 117-144.
  2. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March. [Downloadable!] (restricted)
  3. Goldberg, Pinelopi Koujianou, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Blackwell Publishing, vol. 46(1), pages 1-33, March. [Downloadable!] (restricted)
  4. Blair, Roger D & Kaserman, David L & Tepel, Richard C, 1984. "The Impact of Improved Mileage on Gasoline Consumption," Economic Inquiry, Oxford University Press, vol. 22(2), pages 209-17, April.
  5. Mannering, Fred L., 1986. "A note on endogenous variables in household vehicle utilization equations," Transportation Research Part B: Methodological, Elsevier, vol. 20(1), pages 1-6, February. [Downloadable!] (restricted)
  6. Parry, Ian & Portney, Paul & Harrington, Winston & Gruenspecht, Howard, 2003. "The Economics of Fuel Economy Standards," Discussion Papers dp-03-44, Resources For the Future. [Downloadable!]
  7. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July. [Downloadable!] (restricted)
  8. D A Hensher, 1986. "Dimensions of automobile demand: an overview of an Australian research project," Environment and Planning A, Pion Ltd, London, vol. 18(10), pages 1339-1374, October. [Downloadable!] (restricted)
  9. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September. [Downloadable!]
    Other versions:
  10. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Gerard de Jong & Hugh Gunn, 2001. "Recent Evidence on Car Cost and Time Elasticities of Travel Demand in Europe," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 137-160, May. [Downloadable!] (restricted)
  12. Daniel J. Graham & Stephen Glaister, 2002. "The Demand for Automobile Fuel: A Survey of Elasticities," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(1), pages 1-25, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Manuel Frondel & Jörg Peters & Colin Vance, 2007. "Identifying the Rebound - Evidence from a German Household Panel," Ruhr Economic Papers 0032, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  2. Shanjun Li & Roger von Haefen & Christopher Timmins, 2008. "How Do Gasoline Prices Affect Fleet Fuel Economy?," NBER Working Papers 14450, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Parry, Ian W.H. & Timilsina, Govinda R., 2008. "How Should Passenger Travel in Mexico City Be Priced?," Discussion Papers dp-08-17, Resources For the Future. [Downloadable!]
  4. Manuel Frondel & Jörg Peters & Colin Vance, 2007. "Identifying the Rebound: Theoretical Issues and Empirical. Evidence from a German Household Panel," RWI Discussion Papers 0057, Rheinisch-Westfälisches Institut für Wirtschaftsforschung. [Downloadable!]
  5. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2008. "The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit," Discussion Papers dp-08-28, Resources For the Future. [Downloadable!]
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