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Heterogeneity in the response to gasoline prices: Evidence from Pennsylvania and implications for the rebound effect

Kenneth Gillingham (), Alan Jenn and Inês M.L. Azevedo

Energy Economics, 2015, vol. 52, issue S1, S41-S52

Abstract: The consumer response to changing gasoline prices has long interested economists and policymakers, for it has important implications for the effects of gasoline taxation and vehicle energy efficiency policies. This study examines both the elasticity of driving with respect to changing gasoline prices and heterogeneity in this elasticity by geography, the fuel economy of the vehicle, and the age of the vehicle. We use detailed annual vehicle-level emissions inspection test data from Pennsylvania that include odometer readings, inspection zip codes, and extensive vehicle characteristics. We estimate a short-run gasoline price elasticity of driving demand of −0.10, and find substantial heterogeneity in this responsiveness. The elasticity is largely driven by low fuel economy vehicles, as well as vehicles between 3 and 7years old. Our findings help reconcile some of the recent literature and provide guidance on the magnitude of the direct rebound effect from light duty vehicle energy efficiency policies.

Keywords: Energy efficiency; Rebound effect; Gasoline price elasticity; Big data analytics (search for similar items in EconPapers)
JEL-codes: H23 Q38 Q41 (search for similar items in EconPapers)
Date: 2015
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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