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Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand

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  • Donna, Javier D.

Abstract

I develop a structural model of urban travel to estimate long run gasoline price elasticities. I model the demand for transportation services using a dynamic discrete-choice model with switching costs and estimate it using a panel dataset with public market-level data on automobile and public transit use in Chicago. Long-run own- (automobile) and cross- (transit) price elasticities are substantially more elastic than short-run elasticities. Elasticity estimates from static and myopic models are downward biased. I use the estimated model to evaluate the response to several counterfactual policies. A gasoline tax is less regressive after accounting for the long-run substitution behavior.

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  • Donna, Javier D., 2021. "Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand," MPRA Paper 121039, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121039
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    More about this item

    Keywords

    Long-run gasoline price elasticities; Dynamic demand; Switching Costs; Hysteresis; Consumer Inertia; Gasoline Tax Incidence;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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