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The rebound effect for automobile travel: Asymmetric response to price changes and novel features of the 2000s

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  • Hymel, Kent M.
  • Small, Kenneth A.

Abstract

Previous research suggests that the elasticity of light-duty motor vehicle travel with respect to fuel cost, known as the “rebound effect,” is modest in size and probably declined in magnitude between the 1960s and the late 1990s. However, turmoil in energy markets during the early 2000s has raised new questions about the stability of this elasticity. Using panel data on U.S. states, we revisit the simultaneous-equations methodology of Small and Van Dender (2007) and Hymel et al. (2010) to see whether structural parameters have changed. Using data through 2009, we confirm the earlier finding of a rebound effect that declines in magnitude with income, but we also find an upward shift in its magnitude of about 0.025 during the years 2003–2009. In addition, we find that the rebound effect is much greater in magnitude in years when gasoline prices are rising than when they are falling. It is also greater during times of media attention and price volatility, which explains about half the upward shift just mentioned.

Suggested Citation

  • Hymel, Kent M. & Small, Kenneth A., 2015. "The rebound effect for automobile travel: Asymmetric response to price changes and novel features of the 2000s," Energy Economics, Elsevier, vol. 49(C), pages 93-103.
    • Handle: RePEc:eee:eneeco:v:49:y:2015:i:c:p:93-103
    DOI: 10.1016/j.eneco.2014.12.016
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    More about this item

    Keywords

    Rebound effect; VMT elasticity; Gasoline demand; Asymmetric response;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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