The Long-Run Structure of Transportation and Gasoline Demand

Abstract

This article reports estimates of a cross national model for automobile ownership, fleet fuel efficiency, driving per vehicle, and as derived from these three, gasoline consumption. The model is a recursive system of equations derived by aggregating individual behavioral equations for the choice of a durable good and its usage. The results suggest that across countries, gasoline price differences exert themselves primarily by affecting the amount of driving, and not as time series studies show, through fleet fuel efficiency. The estimates also suggest that gasoline consumption is much more income elastic than it was previously thought to be and that most of this income effect derives from the impact of income on auto ownership.