Domestic transport charges: Estimation of transport-related elasticities

Dean Hyslop, Trinh Le, David Maré, Lynn Riggs () and Nic Watson ()
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Lynn Riggs: Motu Economic and Public Policy Research
Nic Watson: Motu Economic and Public Policy Research

No 23_10, Working Papers from Motu Economic and Public Policy Research

Abstract: In order to better understand the potential effects of transport policies, it is important to understand household spending patterns across different transport-related categories as well as across different households. This study uses three distinct approaches to estimating transport elasticities for New Zealand: cross section, time series, and event studies. The estimated own-price elasticity of fuel demand ranges from –0.1 (very inelastic) based on time-series data to around –2 (very elastic) based on the event-study approach. Using cross-sectional household-level data and regional price variation, we estimate that price elasticity of petrol demand is –0.66 over all households, and ranges from –0.78 for the lowest household expenditure quintile to –0.43 for the highest expenditure quintile, indicating that petrol demand is price-inelastic, and more so for richer households. The different fuel price elasticities estimated by this study represent a range of possible consumer responses when modelling the impact of price changes.

Keywords: price elasticities; transport demand vehicle kilometres travelled; fuel usage (search for similar items in EconPapers)
JEL-codes: D12 R22 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-11
New Economics Papers: this item is included in nep-agr, nep-env and nep-tre
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