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Explaining the Variation in Elasticity Estimates of Gasoline Demand in the United States: A Meta-Analysis

Abstract:
Meta-analysis is used to determine if there are factors that systematically affect price and income elasticity estimates in studies of gasoline demand in the United States. Elasticity estimates from previous studies are used as the dependent variable with data characteristics, model structure, and estimation technique as the independent variables. Included among the explanatory variables a rejunctional form, lag structure, time span, and national setting (U.S. versus the U.S. pooled with other countries). Inclusion of vehicle ownership in gasoline demand studies is found to result in lower estimates of income elasticity, data sets which pool U.S. and foreign data result in larger (absolute) estimates of both price and income elasticity, and the small difference between static and dynamic models suggests that lagged responses to price or income changes are relatively short. This study also found that elasticity estimates appear relatively robust across estimation techniques.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy Modeling – Sectoral Energy Demand & Technology

JEL Codes: C51: Model Construction and Estimation, Q41: Energy: Demand and Supply; Prices, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, C52: Model Evaluation, Validation, and Selection, Q48: Energy: Government Policy, D12: Consumer Economics: Empirical Analysis, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: Gasoline demand, price elasticity, gasoline prices, Meta-analysis, US, vehicle ownership

DOI: 10.5547/ISSN0195-6574-EJ-Vol17-No3-4

Published in Volume17, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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