Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand

78 Pages Posted: 9 Dec 2018 Last revised: 1 Sep 2021

See all articles by Javier D. Donna

Javier D. Donna

University of Miami; Rimini Centre for Economic Analysis

Date Written: May 10, 2021


I develop a structural model of urban travel to estimate long-run gasoline price elasticities. I model the demand for transportation services using a dynamic discrete-choice model with switching costs and estimate it using a panel dataset with public market-level data on automobile and public transit use in Chicago. Long-run own- (automobile) and cross- (transit) price elasticities are substantially more elastic than short-run elasticities. Elasticity estimates from static and myopic models are downward biased. I use the estimated model to evaluate the response to several counterfactual policies. A gasoline tax is less regressive after accounting for the long-run substitution behavior.

Keywords: Long-run gasoline price elasticities, Dynamic demand, Switching Costs, Hysteresis, Consumer Inertia, Gasoline Tax Incidence

JEL Classification: H22, H25, L43, L71, L91, L98

Suggested Citation

Donna, Javier D., Measuring Long-Run Gasoline Price Elasticities in Urban Travel Demand (May 10, 2021). Available at SSRN: or

Javier D. Donna (Contact Author)

University of Miami ( email )

Coral Gables, FL 33124
United States

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Rimini Centre for Economic Analysis ( email )

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