Measuring Long-Run Price Elasticities in Urban Travel Demand

64 Pages Posted: 9 Dec 2018 Last revised: 20 Feb 2019

See all articles by Javier D. Donna

Javier D. Donna

Assistant Professor of Economics

Date Written: November 5, 2018

Abstract

This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions.

Keywords: Long-run price elasticities, Dynamic demand travel, Hysteresis

JEL Classification: L71, L91, L98

Suggested Citation

Donna, Javier D., Measuring Long-Run Price Elasticities in Urban Travel Demand (November 5, 2018). Available at SSRN: https://ssrn.com/abstract=3285200 or http://dx.doi.org/10.2139/ssrn.3285200

Javier D. Donna (Contact Author)

Assistant Professor of Economics

University of Florida
Department of Economics
Gainesville, FL 32606
United States

HOME PAGE: http://www.jdonna.org/

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