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A Tale of Two Tails: Commuting and the Fuel Price Response in Driving

Kenneth Gillingham () and Anders Munk-Nielsen

No 22937, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The consumer price responsiveness of driving demand is central to the welfare consequences of fuel price changes. This study uses rich data covering the entire population of vehicles and consumers in Denmark to find a medium-run price elasticity of driving of -0.30. We uncover an important feature of driving demand: two small groups of much more responsive households that make up the lower and upper tails of the work distance distribution. The first group lives close to work in urban areas. The second group lives outside of major urban areas and has the longest commutes. Access to public transport appears to be the force behind the existence of the tails, enabling the switch away from driving. We find that a fuel price increase of 1 DKK/liter implies an average deadweight loss of 0.66 DKK/liter, but there is considerable heterogeneity and the tails bear a larger share of the loss.

JEL-codes: Q4 Q5 R2 R4 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ene, nep-tre and nep-ure
Note: EEE
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Published as Kenneth Gillingham, 2018. "A Tale of Two Tails: Commuting and the Fuel Price Response in Driving," Journal of Urban Economics, .

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Related works:
Journal Article: A tale of two tails: Commuting and the fuel price response in driving (2019) Downloads
Working Paper: A Tale of Two Tails: Commuting and the Fuel Price Response in Driving (2017) Downloads
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