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Heterogeneity in the response to gasoline prices: Evidence from Pennsylvania and implications for the rebound effect

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  • Gillingham, Kenneth
  • Jenn, Alan
  • Azevedo, Inês M.L.

Abstract

The consumer response to changing gasoline prices has long interested economists and policymakers, for it has important implications for the effects of gasoline taxation and vehicle energy efficiency policies. This study examines both the elasticity of driving with respect to changing gasoline prices and heterogeneity in this elasticity by geography, the fuel economy of the vehicle, and the age of the vehicle. We use detailed annual vehicle-level emissions inspection test data from Pennsylvania that include odometer readings, inspection zip codes, and extensive vehicle characteristics. We estimate a short-run gasoline price elasticity of driving demand of −0.10, and find substantial heterogeneity in this responsiveness. The elasticity is largely driven by low fuel economy vehicles, as well as vehicles between 3 and 7years old. Our findings help reconcile some of the recent literature and provide guidance on the magnitude of the direct rebound effect from light duty vehicle energy efficiency policies.

Suggested Citation

  • Gillingham, Kenneth & Jenn, Alan & Azevedo, Inês M.L., 2015. "Heterogeneity in the response to gasoline prices: Evidence from Pennsylvania and implications for the rebound effect," Energy Economics, Elsevier, vol. 52(S1), pages 41-52.
  • Handle: RePEc:eee:eneeco:v:52:y:2015:i:s1:p:s41-s52
    DOI: 10.1016/j.eneco.2015.08.011
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    References listed on IDEAS

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    3. de Miguel, Carlos & Labandeira, Xavier & Löschel, Andreas, 2015. "Frontiers in the economics of energy efficiency," Energy Economics, Elsevier, vol. 52(S1), pages 1-4.
    4. Dimitropoulos, Alexandros & Oueslati, Walid & Sintek, Christina, 2018. "The rebound effect in road transport: A meta-analysis of empirical studies," Energy Economics, Elsevier, vol. 75(C), pages 163-179.
    5. Gillingham, Kenneth & Munk-Nielsen, Anders, 2019. "A tale of two tails: Commuting and the fuel price response in driving," Journal of Urban Economics, Elsevier, vol. 109(C), pages 27-40.
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    7. Burke, Paul J. & Batsuuri, Tsendsuren & Yudhistira, Muhammad Halley, 2017. "Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 105(C), pages 167-180.
    8. Goetzke, Frank & Vance, Colin, 2018. "Is gasoline price elasticity in the United States increasing? Evidence from the 2009 and 2017 national household travel surveys," Ruhr Economic Papers 765, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    10. repec:eee:transa:v:113:y:2018:i:c:p:227-242 is not listed on IDEAS
    11. De Borger, Bruno & Mulalic, Ismir & Rouwendal, Jan, 2016. "Substitution between cars within the household," Transportation Research Part A: Policy and Practice, Elsevier, vol. 85(C), pages 135-156.
    12. Muhammad Omer, 2018. "Estimating Elasticity of Transport Fuel Demand in Pakistan," SBP Working Paper Series 96, State Bank of Pakistan, Research Department.
    13. repec:eee:eneeco:v:67:y:2017:i:c:p:346-354 is not listed on IDEAS
    14. Sheldon, Tamara L. & Dua, Rubal, 2018. "Gasoline savings from clean vehicle adoption," Energy Policy, Elsevier, vol. 120(C), pages 418-424.
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    16. Gimenez-Nadal, J. Ignacio & Molina, José Alberto, 2019. "Green Commuting and Gasoline Taxes in the United States," IZA Discussion Papers 12377, Institute of Labor Economics (IZA).
    17. Chi, Junwook, 2016. "Long- and short-run asymmetric responses of motor-vehicle travel to fuel price variations: New evidence from a nonlinear ARDL approach," Transport Policy, Elsevier, vol. 50(C), pages 126-134.

    More about this item

    Keywords

    Energy efficiency; Rebound effect; Gasoline price elasticity; Big data analytics;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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