Fuel economy and the price of gasoline: Evidence from fueling-level micro data

Christopher R. Knittel and Shinsuke Tanaka

Journal of Public Economics, 2021, vol. 202, issue C

Abstract: The short-term elasticity of gasoline consumption is determined by both vehicle distances traveled and the efficiency with which each mile is driven. Rarely is the latter observed. We use novel micro-level data on on-road fuel consumption and fuel prices in Japan to estimate both the contemporaneous and dynamic effects of gasoline prices on on-road fuel economy. Our estimate of the contemporaneous price elasticity of on-road fuel economy is approximately 0.07, suggesting that approximately 19% of the price elasticity of gasoline consumption comes from improvements in fuel-conserving behavior. We also find limited habit formation of fuel economy changes; fuel economy effectively responds only to current gasoline prices. This is consistent with substantial utility costs for behavioral adjustments in fuel saving.

Keywords: Price elasticity of on-road fuel economy; Driving habit formation; Gasoline consumption (search for similar items in EconPapers)
JEL-codes: D12 L71 L91 Q31 Q41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:202:y:2021:i:c:s0047272721001328

DOI: 10.1016/j.jpubeco.2021.104496

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