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Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect

Author

Listed:
  • Kenneth A. Small

    (Department of Economics, University of California-Irvine)

  • Kurt Van Dender

    (Department of Economics, University of California-Irvine)

Abstract

We estimate the rebound effect for motor vehicles, by which improved fuel efficiency causes additional travel, using a pooled cross section of US states for 1966-2001. Our model accounts for endogenous changes in fuel efficiency, distinguishes between autocorrelation and lagged effects, includes a measure of the stringency of fuel-economy standards, and allows the rebound effect to vary with income, urbanization, and the fuel cost of driving. At sample averages of variables, our simultaneous-equations estimates of the short- and long-run rebound effect are 4.5% and 22.2%. But rising real income caused it to diminish substantially over the period, aided by falling fuel prices. With variables at 1997-2001 levels, our estimates are only 2.2% and 10.7%, considerably smaller than values typically assumed for policy analysis. With income at the 1997 – 2001 level and fuel prices at the sample average, the estimates are 3.1% and 15.3%, respectively.

Suggested Citation

  • Kenneth A. Small & Kurt Van Dender, 2006. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," Working Papers 050603, University of California-Irvine, Department of Economics.
  • Handle: RePEc:irv:wpaper:050603
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Carbon dioxide; Fuel economy; Travel demand; Motor vehicle use; Rebound effect;
    All these keywords.

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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