Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand

78 Pages Posted: 9 Dec 2018 Last revised: 1 Sep 2021

Date Written: May 10, 2021

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.

Keywords: Long-run gasoline price elasticities, Dynamic demand, Switching Costs, Hysteresis, Consumer Inertia, Gasoline Tax Incidence

JEL Classification: H22, H25, L43, L71, L91, L98

Suggested Citation

Donna, Javier D., Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand (May 10, 2021). Available at SSRN: https://ssrn.com/abstract=3285200 or http://dx.doi.org/10.2139/ssrn.3285200

Javier D. Donna (Contact Author)

University of Florida ( email )

Gainesville, FL 32606
United States

HOME PAGE: http://www.jdonna.org/

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