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Heterogeneity in price elasticity of vehicle kilometers traveled: Evidence from micro-level panel data

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  • Ivan Tilov
  • Sylvain Weber

Abstract

This article presents an empirical estimation of the effect of fuel prices on vehicle kilometers traveled (VKT) using a panel dataset of 1,138 Swiss households. Elasticities are estimated for different segments of households, based on their socio-demographic and vehicle characteristics, as well as on their driving intensity. Our results indicate larger price elasticities than previous estimates based on aggregate data for Switzerland and reveal important heterogeneity in price sensitivity across segments. Households who live in urban areas, who live farther from their workplace, and who own more efficient vehicles are significantly more reactive to price variations. The results of a quantile regression model for panel data show that travel-intensive households are responsive to changes in gasoline price, while less intensive drivers do not exhibit statistically significant price elasticities. In addition to gasoline taxes, it therefore appears that non-price measures tailored to household segments would be useful to provide supplementary incentives to reduce distance traveled and/or avoid penalizing some specific groups.

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  • Ivan Tilov & Sylvain Weber, 2020. "Heterogeneity in price elasticity of vehicle kilometers traveled: Evidence from micro-level panel data," IRENE Working Papers 20-12, IRENE Institute of Economic Research.
    • Handle: RePEc:irn:wpaper:20-12
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    More about this item

    Keywords

    vehicle kilometers traveled (VKT); car-travel demand; fuel price; elasticities; household behavior; heterogeneity; quantile regression; panel data; Switzerland.;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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