Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand

Donna, Javier D. (2021): Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand. Forthcoming in:

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Long-run gasoline price elasticities, Dynamic demand, Switching Costs, Hysteresis, Consumer Inertia, Gasoline Tax Incidence
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; L - Industrial Organization > L4 - Antitrust Issues and Policies > L43 - Legal Monopolies and Regulation or Deregulation; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L71 - Mining, Extraction, and Refining: Hydrocarbon Fuels; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L91 - Transportation: General; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L98 - Government Policy

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