Measuring Long-Run Price Elasticities in Urban Travel Demand
64 Pages Posted: 9 Dec 2018
Date Written: November 5, 2018
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
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