The effect of income on car ownership: evidence of asymmetry
This paper examines the effect of income on car ownership, and specifically the question of hysteresis or asymmetry. Although there is little doubt that rising income leads to higher car ownership, less is understood about the effect of falling income. Traditional demand modelling is based on the implicit assumption that demand responds symmetrically to rising and falling income. The object of this study is to test this assumption statistically. Using a dynamic econometric model relating household car ownership to income, the number of adults and children in the household, car prices and lagged car ownership, income decomposition techniques are employed to separately estimate elasticities with respect to rising and falling income. The equality of these elasticities - no hysteresis - is tested statistically against the inequality - hysteresis - hypothesis. Various functional specifications are tested in order to assure the robustness of the results to assumptions concerning functional form. The estimation is based on cohort data constructed from 1970 to 1995 UK Family Expenditure Surveys, and a pseudo-panel methodology is employed. The results indicate that car ownership responds more strongly to rising than to falling income - there is a 'stickiness' in the downward direction. In addition, there is evidence that the income elasticity is not constant, but instead declines with increasing car ownership.
Volume (Year): 35 (2001)
Issue (Month): 9 (November)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
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.:
- Dargay, Joyce & Gately, Dermot, 1999. "Income's effect on car and vehicle ownership, worldwide: 1960-2015," Transportation Research Part A: Policy and Practice, Elsevier, vol. 33(2), pages 101-138, February.
- Goodwin, Phil, 1995. "Car Dependence," Transport Policy, Elsevier, vol. 2(3), pages 151-152, July.
- Dargay, Joyce & Gately, Dermot, 1997. "The demand for transportation fuels: Imperfect price-reversibility?," Transportation Research Part B: Methodological, Elsevier, vol. 31(1), pages 71-82, February.
- Russell Davidson & James G. MacKinnon, 1981.
"Tests for Model Specification in the Presence of Alternative Hypotheses: Some Further Results,"
430, Queen's University, Department of Economics.
- MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
- Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
- Kitamura, Ryuichi & Bunch, David S., 1990. "Heterogeneity and State Dependence in Household Car Ownership: A Panel Analysis Using Ordered-Response Probit Models with Error Components," University of California Transportation Center, Working Papers qt0qv4q55r, University of California Transportation Center.
- Golob, Thomas F., 1990. "The Dynamics of Household Travel Time Expenditures and Car Ownership Decisions," University of California Transportation Center, Working Papers qt1676t0bp, University of California Transportation Center.
When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:35:y:2001:i:9:p:807-821. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.