Working Paper: NBER ID: w26488
Authors: Christopher R. Knittel; Shinsuke Tanaka
Abstract: We use novel microdata on on-road fuel consumption and prices paid for fuel in Japan to estimate short-run price elasticities of demand for gasoline consumption. We have three main findings. First, our elasticity estimates of roughly -0.37 are in orders of magnitude larger than previously estimated using more aggregate data. Second, we are one of the first papers to separately estimate both the price elasticities of miles driven (-0.30) and on-road fuel economy (0.07). Lastly, we find that on-road fuel economy is determined by recent prices than distant past prices paid, suggesting limited habit formation of fuel-conserving driving behaviors.
Keywords: Gasoline Demand; Price Elasticity; Driving Behavior; Fuel Economy
JEL Codes: D12; L71; Q31; Q41; R48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Gasoline Prices (N72) | Gasoline Consumption (N72) |
| Gasoline Prices (N72) | Vehicle Distance Traveled (L92) |
| Gasoline Prices (N72) | Fuel Economy (R48) |
| Gasoline Prices (N72) | Price Elasticity of Demand (D12) |
| Price Increases (P22) | Price Elasticity of Demand (D12) |
| Price Decreases (D41) | Price Elasticity of Demand (D12) |
| Gasoline Prices (N72) | Current Driving Behavior (D19) |