Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand

Jonathan Hughes (), Christopher Knittel and Daniel Sperling

No 12530, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Understanding the sensitivity of gasoline demand to changes in prices and income has important implications for policies related to climate change, optimal taxation and national security, to name only a few. While the short-run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of these studies focus on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that current demand elasticities differ from these previous periods, as transportation analysts have hypothesized that behavioral and structural factors over the past several decades have changed the responsiveness of U.S. consumers to changes in gasoline prices. In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980. The estimated short-run income elasticities range from 0.21 to 0.75 and when estimated with the same models are not significantly different between the two periods.

JEL-codes: D12 L91 Q31 Q41 R40 R41 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-ene
Note: IO EEE
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Citations: View citations in EconPapers (104)

Published as Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.

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Related works:
Journal Article: Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand (2008)
Working Paper: Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand (2006)
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