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Domestic transport charges: Estimation of transport-related elasticities

Author

Listed:
  • Dean Hyslop

    (Motu Economic and Public Policy Research)

  • Trinh Le

    (Motu Economic and Public Policy Research)

  • David C. Maré

    (Motu Economic and Public Policy Research)

  • Lynn Riggs

    (Motu Economic and Public Policy Research)

  • Nic Watson

    (Motu Economic and Public Policy Research)

Abstract

In order to better understand the potential effects of transport policies, it is important to understand household spending patterns across different transport-related categories as well as across different households. This study uses three distinct approaches to estimating transport elasticities for New Zealand: cross section, time series, and event studies. The estimated own-price elasticity of fuel demand ranges from -0.1 (very inelastic) based on time-series data to around -2 (very elastic) based on the event-study approach. Using cross-sectional household-level data and regional price variation, we estimate that price elasticity of petrol demand is -0.66 over all households, and ranges from -0.78 for the lowest household expenditure quintile to -0.43 for the highest expenditure quintile, indicating that petrol demand is price-inelastic, and more so for richer households. The different fuel price elasticities estimated by this study represent a range of possible consumer responses when modelling the impact of price changes.

Suggested Citation

  • Dean Hyslop & Trinh Le & David C. Maré & Lynn Riggs & Nic Watson, 2023. "Domestic transport charges: Estimation of transport-related elasticities," Motu Working Papers 23_10, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:23_10
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

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