A CENSORED REGRESSION MODEL OF PRIVATE CAR USE

G Jong and Jan Cramer

No 293121, University of Amsterdam, Actuarial Science and Econometrics Archive from University of Amsterdam, Faculty of Economics and Business

Abstract: We develop a model for the joint determination of private car ownership and private car use by households. To own a private car is not worth the cost unless permanent annual mileage exceeds a certain minimum; observed annual mileage however differs from permanent mileage because of transitory factors. This model calls for a nonzero Tobin threshold and for an unusual distribution of the disturbances. We estimate its parameters from the 1980 Dutch household budget survey and obtain satisfactory results. The threshold is about 7500 kilometers per year, and the overall income elasticity of mileage 0 .5 . We also estimate a variable threshold model. In this case the overall income elasticity is slightly higher. The estimates of the variable threshold model confirm the old idea which says that the higher incomes will have a lower threshold.

Keywords: Consumer/Household Economics; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 30
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Persistent link: https://EconPapers.repec.org/RePEc:ags:amstas:293121

DOI: 10.22004/ag.econ.293121

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