Determinants of Expenditure in Automobile Maintenance: Some Evidence from Greece

This paper derives a model of maintenance expenditures from an analytical framework in which maintenance, utilization and service life are appropriately integrated and estimates it with the help of automobile data from Greece. On the theoretical plain it is shown that the model allows endogenously for most of the variables that have been identified in the relevant literature as important determinants of maintenance expenditures. Also the model yields sharp sign predictions for the included variables and by doing so it sheds considerable light on sev-eral outstanding issues in this area. On the empirical plain it is found that: a) the best func-tional form is obtained when the model is estimated using Box-Cox power transformed vari-ables in conjunction with the pooled data of the sample and country specific dummy variables to allow for shifts in the intercepts; b) the reported amounts of outlays for automobile mainte-nance are positively related to the automobile’s age, salvage value and intensity of utilization, and c) Italian cars are most demanding in maintenance outlays, followed by cars from France, Germany and Other Countries, which turn out to be roughly equally expensive, and, lastly, by cars made in Japan which appear to be the least expensive to maintain. However, the elastic-ities of maintenance expenditures with respect to these three variables follow exactly the re-verse order, so car buyers face a choice between cars with high levels of maintenance and low elasticities, and vice versa.