IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20060106.html
   My bibliography  Save this paper

A Meta-analysis of the Price Elasticity of Gasoline Demand. A System of Equations Approach

Author

Listed:
  • Martijn Brons

    (Vrije Universiteit Amsterdam)

  • Peter Nijkamp

    (Vrije Universiteit Amsterdam)

  • Eric Pels

    (Vrije Universiteit Amsterdam)

  • Piet Rietveld

    (Vrije Universiteit Amsterdam)

Abstract

Automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency, mileage per car and car ownership. This implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency, mileage per car and car ownership. In this meta-analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand. A methodological novelty is that we use the linear relationship between the elasticities to develop a meta-analytical estimation approach based on a system of equations. This approach enables us to combine observations of different elasticities and thus increase our sample size. Furthermore it allows for a more detailed interpretation of our meta-regression results. The empirical results of the study demonstrate that the system of equations approach leads to more precise results (i.e., lower standard errors) than a standard! meta-analytical approach. We find that, with a mean price elasticity of -0.53, the demand for gasoline is not very price sensitive. The impact a change in the gasoline price on demand is mainly driven by a response in fuel efficiency and car ownership and to a lesser degree by changes in the mileage per car. Furthermore, we find that study characteristics relating to the geographic area studied, the year of the study, the type of data used, the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand. See 'A meta-analysis of the price elasticity of gasoline demand. A SUR approach' in Energy Economics (2008). Volume 30, pages 2105-2122.

Suggested Citation

  • Martijn Brons & Peter Nijkamp & Eric Pels & Piet Rietveld, 2006. "A Meta-analysis of the Price Elasticity of Gasoline Demand. A System of Equations Approach," Tinbergen Institute Discussion Papers 06-106/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20060106
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/06106.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. An-loh Lin & Botsas, Eleftherios N. & Monroe, Scott A., 1985. "State gasoline consumption in the USA : An econometric analysis," Energy Economics, Elsevier, vol. 7(1), pages 29-36, January.
    2. Michael Kennedy, 1974. "An Economic Model of the World Oil Market," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 540-577, Autumn.
    3. Dahl, Carol A, 1979. "Consumer Adjustment to a Gasoline Tax," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 427-432, August.
    4. David L. Greene, 1990. "CAFE OR PRICE?: An Analysis of the Effects of Federal Fuel Economy Regulations and Gasoline Price on New Car MPG, 1978-89," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 37-58.
    5. Drollas, Leonidas P., 1984. "The demand for gasoline : Further evidence," Energy Economics, Elsevier, vol. 6(1), pages 71-82, January.
    6. Blair, Roger D & Kaserman, David L & Tepel, Richard C, 1984. "The Impact of Improved Mileage on Gasoline Consumption," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 209-217, April.
    7. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-179, May.
    8. Eltony, M. N. & Al-Mutairi, N. H., 1995. "Demand for gasoline in Kuwait : An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 17(3), pages 249-253, July.
    9. Bentzen, Jan, 1994. "An empirical analysis of gasoline demand in Denmark using cointegration techniques," Energy Economics, Elsevier, vol. 16(2), pages 139-143, April.
    10. W. A. Donnelly, 1982. "The Regional Demand for Petrol in Australia," The Economic Record, The Economic Society of Australia, vol. 58(4), pages 317-327, December.
    11. Archibald, Robert & Gillingham, Robert, 1980. "An Analysis of the Short-Run Consumer Demand for Gasoline Using Household Survey Data," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 622-628, November.
    12. Robert McRae, 1994. "Gasoline Demand in Developing Asian Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 143-156.
    13. Wirl, Franz, 1991. "Energy demand and consumer price expectations : An empirical investigation of the consequences from the recent oil price collapse," Resources and Energy, Elsevier, vol. 13(3), pages 241-262, September.
    14. Ramsey, J B & Rasche, R & Allen, Bruce T, 1975. "An Analysis of the Private and Commercial Demand for Gasoline," The Review of Economics and Statistics, MIT Press, vol. 57(4), pages 502-507, November.
    15. Berndt, Ernst R. & Botero, German, 1985. "Energy demand in the transportation sector of Mexico," Journal of Development Economics, Elsevier, vol. 17(3), pages 219-238, April.
    16. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
    17. Abdel-Khalek, Gouda, 1988. "Income and price elasticities of energy consumption in Egypt : A time-series analysis," Energy Economics, Elsevier, vol. 10(1), pages 47-58, January.
    18. Phlips, Louis, 1972. "A Dynamic Version of the Linear Expenditure Model," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 450-458, November.
    19. Sara Banaszak & Ujjayant Chakravorty & PingSun Leung, 1999. "Demand for Ground Transportation Fuel and Pricing Policy in Asian Tigers: A Comparative Study of Korea and Taiwan," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 145-165.
    20. James M. Griffin, 1979. "Statistical Cost Analysis Revisited," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(1), pages 107-129.
    21. Mehta, Jatinder S. & Narasimham, Gorti V. L. & Swamy, Paravastu A. V. B., 1978. "Estimation of a dynamic demand function for gasoline with different schemes of parameter variation," Journal of Econometrics, Elsevier, vol. 7(3), pages 263-279, April.
    22. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, vol. 77(2), pages 303-327, April.
    23. Dermot Gately, 1990. "The U.S. Demand for Highway Travel and Motor Fuel," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 59-74.
    24. Ramanathan, R., 1999. "Short- and long-run elasticities of gasoline demand in India: An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 21(4), pages 321-330, August.
    25. Dahl, Carol A., 1978. "American energy consumption -- Extravagant or economical? : A study of gasoline demand," Resources and Energy, Elsevier, vol. 1(4), pages 359-373, December.
    26. William C. Wheaton, 1982. "The Long-Run Structure of Transportation and Gasoline Demand," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 439-454, Autumn.
    27. Baltagi, Badi H. & Griffin, James M., 1983. "Gasoline demand in the OECD : An application of pooling and testing procedures," European Economic Review, Elsevier, vol. 22(2), pages 117-137, July.
    28. Carol A. Dahl, 1982. "Do Gasoline Demand Elasticities Vary?," Land Economics, University of Wisconsin Press, vol. 58(3), pages 373-382.
    29. Nancy T. Gallini, 1983. "Demand for Gasoline in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 299-324, May.
    30. Kayser, Hilke A., 2000. "Gasoline demand and car choice: estimating gasoline demand using household information," Energy Economics, Elsevier, vol. 22(3), pages 331-348, June.
    31. Samimi, Rodney, 1995. "Road transport energy demand in Australia: A cointegration approach," Energy Economics, Elsevier, vol. 17(4), pages 329-339, October.
    32. Uri, Noel D. & Hassanein, Saad A., 1985. "Testing for stability : Motor gasoline demand and distillate fuel oil demand," Energy Economics, Elsevier, vol. 7(2), pages 87-92, April.
    33. repec:bla:ecorec:v:58:y:1982:i:163:p:317-27 is not listed on IDEAS
    34. Dermot Gately, 1992. "Imperfect Price-Reversibility of U.S. Gasoline Demand: Asymmetric Responses to Price Increases and Declines," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 179-208.
    35. Robert Archibald & Robert Gillingham, 1981. "The Distributional Impact of Alternative Gasoline Conservation Policies," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 426-444, Autumn.
    36. Tishler, Asher, 1983. "The demand for cars and gasoline: A simultaneous approach," European Economic Review, Elsevier, vol. 20(1-3), pages 271-287, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brännlund, Runar, 2013. "The effects on energy saving from taxes on motor fuels: The Swedish case," CERE Working Papers 2013:6, CERE - the Center for Environmental and Resource Economics.
    2. Sene, Seydina Ousmane, 2012. "Estimating the demand for gasoline in developing countries: Senegal," Energy Economics, Elsevier, vol. 34(1), pages 189-194.
    3. Charles Raux, 2011. "Downstream Emissions Trading for Transport," Transportation Research, Economics and Policy, in: Werner Rothengatter & Yoshitsugu Hayashi & Wolfgang Schade (ed.), Transport Moving to Climate Intelligence, chapter 0, pages 209-226, Springer.
    4. Broberg, Thomas, 2014. "Relative income and the WTP for public goods - A case study of forest conservation in Sweden," CERE Working Papers 2014:6, CERE - the Center for Environmental and Resource Economics.
    5. Ciaian, Pavel & Kancs, d'Artis, 2011. "Food, energy and environment: Is bioenergy the missing link?," Food Policy, Elsevier, vol. 36(5), pages 571-580, October.
    6. Ciaian, Pavel & Kancs, d'Artis, 2011. "Interdependencies in the energy-bioenergy-food price systems: A cointegration analysis," Resource and Energy Economics, Elsevier, vol. 33(1), pages 326-348, January.
    7. Reid Ewing & Shima Hamidi & Frank Gallivan & Arthur C Nelson & James B Grace, 2014. "Structural equation models of VMT growth in US urbanised areas," Urban Studies, Urban Studies Journal Limited, vol. 51(14), pages 3079-3096, November.
    8. Elvik, Rune & Ramjerdi, Farideh, 2014. "A comparative analysis of the effects of economic policy instruments in promoting environmentally sustainable transport," Transport Policy, Elsevier, vol. 33(C), pages 89-95.
    9. Mendoza, Miguel Ángel, 2014. "Panorama preliminar de los subsidios y los impuestos a las gasolinas y diésel en los países de América Latina," Documentos de Proyectos 37431, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. repec:lic:licosd:29211 is not listed on IDEAS
    11. Motamedi, Sina, 2016. "The Effect of Changes in Fuel Prices on the Use of Road Transportation in Ontario," 57th Transportation Research Forum (51st CTRF) Joint Conference, Toronto, Ontario, May 1-4, 2016 319275, Transportation Research Forum.
    12. Mori, Keibun, 2012. "Modeling the impact of a carbon tax: A trial analysis for Washington State," Energy Policy, Elsevier, vol. 48(C), pages 627-639.
    13. Filippini, Massimo & Heimsch, Fabian, 2016. "The regional impact of a CO2 tax on gasoline demand: A spatial econometric approach," Resource and Energy Economics, Elsevier, vol. 46(C), pages 85-100.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
    2. Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2012. "Demand for gasoline is more price-inelastic than commonly thought," Energy Economics, Elsevier, vol. 34(1), pages 201-207.
    3. Shaw, Charles, 2020. "Econometric Analysis of Demand for Petrol in India, 1966-2019," MPRA Paper 104797, University Library of Munich, Germany.
    4. Liu, Weiwei, 2014. "Modeling gasoline demand in the United States: A flexible semiparametric approach," Energy Economics, Elsevier, vol. 45(C), pages 244-253.
    5. Sene, Seydina Ousmane, 2012. "Estimating the demand for gasoline in developing countries: Senegal," Energy Economics, Elsevier, vol. 34(1), pages 189-194.
    6. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    7. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    8. Scott, K. Rebecca, 2011. "Demand and price volatility: rational habits in international gasoline demand," CUDARE Working Papers 121931, University of California, Berkeley, Department of Agricultural and Resource Economics.
    9. Setyani Dwi Lestari & Amir Indrabudiman & Wuri Septi Handayani & Teguh Sugiarto, 2019. "Estimation with Macroeconomic Variables in Long-Term Elasticity of Gasoline Consumption," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 326-329.
    10. Bonilla, David, 2009. "Fuel demand on UK roads and dieselisation of fuel economy," Energy Policy, Elsevier, vol. 37(10), pages 3769-3778, October.
    11. Nasser Al Dossary & Carol A. Dahl, 2009. "Is Global Gasoline Demand Still as Responsive to Price?," Working Papers 2009-01, Colorado School of Mines, Division of Economics and Business.
    12. Li, Zheng & Rose, John M. & Hensher, David A., 2010. "Forecasting automobile petrol demand in Australia: An evaluation of empirical models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(1), pages 16-38, January.
    13. Jimy Ferrer Carbonell & Roberto Escalante Semerena, 2014. "Demanda de gasolina en la zona metropolitana del Valle de México: análisis empírico de la reducción del subsidio," Revista de Economía del Rosario, Universidad del Rosario, June.
    14. Bakhat, Mohcine & Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "Elasticities of transport fuels at times of economic crisis: An empirical analysis for Spain," Energy Economics, Elsevier, vol. 68(S1), pages 66-80.
    15. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    16. Burke, Paul J. & Nishitateno, Shuhei, 2013. "Gasoline prices, gasoline consumption, and new-vehicle fuel economy: Evidence for a large sample of countries," Energy Economics, Elsevier, vol. 36(C), pages 363-370.
    17. Robert V. Breunig & Carol Gisz, 2009. "An Exploration of Australian Petrol Demand: Unobservable Habits, Irreversibility and Some Updated Estimates," The Economic Record, The Economic Society of Australia, vol. 85(268), pages 73-91, March.
    18. Mohcine Bakhat & José M. Labeaga & Xavier Labandeira & Xiral Lñpez, 2013. "Economic Crisis and Elasticities of Car Fuels: Evidence for Spain," Working Papers fa15-2013, Economics for Energy.
    19. Lin, C.-Y. Cynthia & Zeng, Jieyin (Jean), 2013. "The elasticity of demand for gasoline in China," Energy Policy, Elsevier, vol. 59(C), pages 189-197.
    20. Polemis, Michael L., 2006. "Empirical assessment of the determinants of road energy demand in Greece," Energy Economics, Elsevier, vol. 28(3), pages 385-403, May.

    More about this item

    Keywords

    Meta-analysis; Price elasticities; Gasoline demand; System of equations;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20060106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.