Driving Behavior and the Price of Gasoline: Evidence from Fueling-Level Micro Data

Christopher R. Knittel, Shinsuke Tanaka

NBER Working Paper No. 26488
Issued in November 2019
NBER Program(s):Environment and Energy Economics, Industrial Organization

We use novel microdata on on-road fuel consumption and prices paid for fuel in Japan to estimate short-run price elasticities of demand for gasoline consumption. We have three main findings. First, our elasticity estimates of roughly -0.37 are in orders of magnitude larger than previously estimated using more aggregate data. Second, we are one of the first papers to separately estimate both the price elasticities of miles driven (-0.30) and on-road fuel economy (0.07). Lastly, we find that on-road fuel economy is determined by recent prices than distant past prices paid, suggesting limited habit formation of fuel-conserving driving behaviors.

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Document Object Identifier (DOI): 10.3386/w26488