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Modeling gasoline demand in the United States: A flexible semiparametric approach

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  • Liu, Weiwei

Abstract

The focus of this paper is on the modeling and estimation of quarterly state-level gasoline demand in the United States. The existing literature may not appropriately evaluate the price elasticity and income elasticity of gasoline demand. Most studies fail to address the possible heterogeneity in gasoline demand elasticities that may arise from a variety of sources. The endogeneity issue of gasoline price has remained redundant throughout the literature. I address these challenges using a flexible demand model and a recently developed estimation technique. The econometric approach allows for functional coefficients to accommodate the heterogeneity in demand elasticities. Several instrumental variables are used to investigate the endogeneity of gasoline price. The estimation results provide strong evidence of heterogeneous gasoline demand elasticities across states and over time. Some state-level attributes along with income and macroeconomic shocks are the potential sources of heterogeneity.

Suggested Citation

  • Liu, Weiwei, 2014. "Modeling gasoline demand in the United States: A flexible semiparametric approach," Energy Economics, Elsevier, vol. 45(C), pages 244-253.
    • Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:244-253
    DOI: 10.1016/j.eneco.2014.07.004
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    References listed on IDEAS

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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