Ruhr Economic Papers

Ruhr Economic Papers #765

Is Gasoline Price Elasticity in the United States Increasing? Evidence from the 2009 and 2017 National Household Travel Surveys

by Frank Goetzke and Colin Vance

RWI, 09/2018, 23 S./p., 8 Euro, ISBN 978-3-86788-893-6 DOI: 10.4419/86788893

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Abstract

Drawing on the 2009 and 2017 waves of the National Household Transportation Survey, this paper models the determinants of vehicle miles traveled, with the aim of parameterizing the magnitude of the fuel price elasticity. To capture changes in this magnitude over the two years of the survey, our specification interacts the logged fuel price with a dummy indicating the 2017 survey year. We find a small but statistically significant mean elasticity of about -0.05 for the year 2009, which increases over fourfold to -0.23 by the year 2017. We explore the robustness of this result to different model specifications and estimation techniques, including instrumental variable estimation to account for the possible endogeneity of fuel prices, as well as quantile regression to account for heterogeneity according to driving intensity. A similar pattern of substantially increasing elasticity emerges across all these models. We speculate that one possible source of this pattern is economic duress from the 2008 financial crisis, which the data suggests reoriented mode choice patterns.

JEL-Classification: D12, Q41, R48

Keywords: Fuel price elasticity; household VMT; heterogeneity

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