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The effect of the price of gasoline on the urban economy: From route choice to general equilibrium

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  • Anas, Alex
  • Hiramatsu, Tomoru

Abstract

RELU-TRAN2, a spatial computable general equilibrium (CGE) model of the Chicago MSA is used to understand how gasoline use, car-VMT, on-the-road fuel intensity, trips and location patterns, housing, labor and product markets respond to a gas price increase. We find a long-run elasticity of gasoline demand (with congestion endogenous) of −0.081, keeping constant car prices and the TFI (technological fuel intensity) of car types but allowing consumers to choose from car types. 43% of this long run elasticity is from switching to transit; 15% from trip, car-type and location choice; 38% from price, wage and rent equilibration, and 4% from building stock changes. 79% of the long run elasticity is from changes in car-VMT (the extensive margin) and 21% from savings in gasoline per mile (the intensive margin); with 83% of this intensive margin from changes in congestion and 17% from the substitution in favor of lower TFI. An exogenous trend-line improvement of the TFI of the car-types available for choice raises the long-run response to a percent increase in the gas price from −0.081 to −0.251. Thus, only 1/3 of the long-run response to the gas price stems from consumer choices and 2/3 from progress in fuel intensity. From 2000 to 2007, real gas prices rose 53.7%, the average car fuel intensity improved 2.7% and car prices fell 20%. The model predicts that from these changes alone, keeping constant population, income, etc. aggregate gasoline use in this period would have fallen by 5.2%.

Suggested Citation

  • Anas, Alex & Hiramatsu, Tomoru, 2012. "The effect of the price of gasoline on the urban economy: From route choice to general equilibrium," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 855-873.
  • Handle: RePEc:eee:transa:v:46:y:2012:i:6:p:855-873
    DOI: 10.1016/j.tra.2012.02.010
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cook, Jonathan A. & Sanchirico, James N. & Salon, Deborah & Williams, Jeffrey, 2015. "Empirical distributions of vehicle use and fuel efficiency across space: Implications of asymmetry for measuring policy incidence," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 187-199.
    2. Al-Ghandoor, Ahmed & Jaber, Jamal & Al-Hinti, Ismael & Abdallat, Yousef, 2013. "Statistical assessment and analyses of the determinants of transportation sector gasoline demand in Jordan," Transportation Research Part A: Policy and Practice, Elsevier, vol. 50(C), pages 129-138.
    3. Nowak, William P. & Savage, Ian, 2013. "The cross elasticity between gasoline prices and transit use: Evidence from Chicago," Transport Policy, Elsevier, vol. 29(C), pages 38-45.
    4. Ioannis Tikoudis, 2015. "Congestion Pricing in Urban Polycentric Networks with Distorted Labor Markets: A Spatial General Equilibrium Model for the Area Randstad," Tinbergen Institute Discussion Papers 15-085/VIII, Tinbergen Institute, revised 26 Oct 2017.
    5. Kim, Jinwon, 2016. "Vehicle fuel-efficiency choices, emission externalities, and urban sprawl," Economics of Transportation, Elsevier, vol. 5(C), pages 24-36.
    6. Nitzsche, Eric & Tscharaktschiew, Stefan, 2013. "Efficiency of speed limits in cities: A spatial computable general equilibrium assessment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 56(C), pages 23-48.
    7. Özhan Yılmaz & Ebru Voyvoda, 2017. "An Integrated General Equilibrium Model for Evaluating Demographic, Social and Economic Impacts of Transport Policies," ERC Working Papers 1706, ERC - Economic Research Center, Middle East Technical University, revised Jun 2017.
    8. Rouhani, Omid M. & Oliver Gao, H., 2014. "An advanced traveler general information system for Fresno, California," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 254-267.
    9. Rouhani, Omid, 2017. "Manage energy/environmental footprints of travel: A proposed solution/methodology," MPRA Paper 83344, University Library of Munich, Germany.

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    Keywords

    Gasoline price; Urban structure; Travel;

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