The Rebound Effect for Automobile Travel:Asymmetric Response to Price Changes and Novel Features of the 2000s

Kent Hymel () and Kenneth Small ()
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Kent Hymel: Department of Economics, California State University at Northridge
Kenneth Small: Department of Economics, University of California-Irvine

No 141503, Working Papers from University of California-Irvine, Department of Economics

Abstract: Previous research suggests that the elasticity of light-duty motor vehicle travel with respect to fuel cost, known as the "rebound effect," is modest in size and probably declined in magnitude between the 1960s and the late 1990s. However, turmoil in energy markets during the early 2000s has raised new questions about the stability of this elasticity. Using panel data on U.S. states, we revisit the simultaneous-equations methodology of Small and Van Dender (2007) and Hymel et al. (2010) to see whether structural parameters have changed. Using data through 2009, we confirm the earlier finding of a rebound effect that declines in magnitude with income, but we also find an upward shift in its magnitude of about 0.025 during the years 2003-2009. In addition, we find that the rebound effect is much greater in magnitude in years when gasoline prices are rising than when they are falling. It is also greater during times of media attention and price volatility, which explains about half the upward shift just mentioned.

Keywords: Rebound effect; VMT elasticity; Gasoline demand; Asymmetric response (search for similar items in EconPapers)
JEL-codes: L91 Q41 R41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ene, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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