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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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    More about this item

    Keywords

    Energy efficiency; Rebound effect; Gasoline price elasticity; Big data analytics;
    All these keywords.

    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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