Differences in the effects of fuel price and income on private car use in Sweden 1999-2008

The objective of this paper is to analyse how the use of privately owned cars in Sweden varies across a number of background parameters including fuel price, disposable income, car purchase cost index, children over 18, employment and the car owners’ distance to work. These factors are analysed separately for men and women, individuals living in urban, rural and sparsely populated areas as well as disposable income quartiles. In particular the adaptation of car use of low income car owners in rural and sparsely populated areas to fuel cost and disposable income variations is analysed. Register data of the whole population in Sweden taken from the Swedish tax authorities for 1999-2008 as well as kilometre readings from the National Vehicle Inspection is used. This allows tracking individual changes in car use over ten years as well as to contrast car use in rural and sparsely populated areas to car use in urban areas. Car use is modelled with a dynamic panel data specification, permitting proper methods to deal with endogeneity problems. Small geographical differences in the sensitivity to variations in disposable income are found. For fuel cost on the other hand, there is a tendency towards higher price sensitivity in rural areas especially in the two lowest income quartiles. In sparsely populated areas, there is no higher sensitivity of fuel price compared to urban areas. The income elasticity of car use is fairly small and decreases with increasing disposable income. This latter finding is compatible with the hypothesis of car driving saturation in the rich countries around the world. The car travel elasticity with respect to fuel price is estimated to be between -0.2 and -0.4 in the short run. Here the pattern is as expected with decreasing fuel-price elasticity with increasing income.