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An Almost Ideal Demand System Model of Household Vehicle Fuel Expenditure Allocation in the United States

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  • Gbadebo Oladosu

Abstract

In this study I model vehicle-fuel expenditure allocation in multi-vehicle households based on the Almost Ideal Demand System (AIDS).Using data from surveys conducted by the Energy Information Administration in 1988, 1991 and 1994, I estimate the AIDS model, augmented with a comprehensive set of household and vehicle characteristics for households owning 1 to 4 vehicles ordered by vehicle age. Results show that vehicle characteristics are the most significant factors in the expenditure allocation process. Mean and standard deviation of price, expenditure and Allen substitution elasticities are calculated across households. Own-price elasticities for all vehicles are close to 1. Allen substitution elasticities indicate that all vehicle pairs are substitutes, and only vehicle 1 is found to be expenditure inelastic. The approach taken in this study enables a disentangling of vehicle allocation/substitution effects from aggregate household vehicle use behavior. This will be useful in the analysis of efficiency and distributional effects of policies affecting household transportation.

Suggested Citation

  • Gbadebo Oladosu, 2003. "An Almost Ideal Demand System Model of Household Vehicle Fuel Expenditure Allocation in the United States," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-21.
  • Handle: RePEc:aen:journl:2003v24-01-a01
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    Cited by:

    1. Xavier Labandeira & José M. Labeaga & Miguel Rodríguez, 2006. "A Residential Energy Demand System for Spain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 87-112.
    2. Nazneen Ferdous & Abdul Pinjari & Chandra Bhat & Ram Pendyala, 2010. "A comprehensive analysis of household transportation expenditures relative to other goods and services: an application to United States consumer expenditure data," Transportation, Springer, vol. 37(3), pages 363-390, May.
    3. Tiezzi, Silvia & Verde, Stefano F., 2016. "Differential demand response to gasoline taxes and gasoline prices in the U.S," Resource and Energy Economics, Elsevier, vol. 44(C), pages 71-91.
    4. Barron, John M. & Umbeck, John R. & Waddell, Glen R., 2008. "Consumer and competitor reactions: Evidence from a field experiment," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 517-531, March.
    5. Xavier Labandeira & José María Labeaga & Miguel Rodríguez, 2008. "The Costs of Kyoto Adjustments for Spanish Households," Working Papers 2008-02, FEDEA.
    6. Ken-ichi Mizobuchi & Hisashi Tanizaki, 2014. "On estimation of almost ideal demand system using moving blocks bootstrap and pairs bootstrap methods," Empirical Economics, Springer, vol. 47(4), pages 1221-1250, December.
    7. Bonilla, David & Schmitz, Klaus E. & Akisawa, Atsushi, 2012. "Demand for mini cars and large cars; decay effects, and gasoline demand in Japan," Energy Policy, Elsevier, vol. 50(C), pages 217-227.

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    JEL classification:

    • F0 - International Economics - - General

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