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Demand for gasoline is more price-inelastic than commonly thought

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  • Havranek, Tomas
  • Irsova, Zuzana
  • Janda, Karel

Abstract

Demand for gasoline is more price-inelastic than commonly thought Abstract: One of the most frequently examined statistical relationships in energy economics has been the price elasticity of gasoline demand. We conduct a quantitative survey of the estimates of elasticity reported for various countries around the world. Our meta- analysis indicates that the literature suffers from publication selection bias: insignificant or positive estimates of the price elasticity are rarely reported, although implausibly large negative estimates are reported regularly. In consequence, the aver- age published estimates of both short- and long-run elasticities are exaggerated twofold. Using mixed effects multilevel meta-regression, we show that after correction for publication bias the average long-run elasticity reaches -0:31 and the average short-run elasticity only -0:09.

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  • Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2011. "Demand for gasoline is more price-inelastic than commonly thought," CUDARE Working Papers 120416, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:120416
    DOI: 10.22004/ag.econ.120416
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    More about this item

    Keywords

    Political Economy; Resource /Energy Economics and Policy;

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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