Formative Experiences and the Price of Gasoline

62 Pages Posted: 30 Jul 2019

See all articles by Christopher Severen

Christopher Severen

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Arthur van Benthem

University of Pennsylvania - Business & Public Policy Department

Date Written: 2019

Abstract

An individual's initial experiences with a common good, such as gasoline, can shape their behavior for decades. We first show that the 1979 oil crisis had a persistent negative effect on the likelihood that individuals that came of driving age during this time drove to work in the year 2000 (i.e., in their mid 30s). The effect is stronger for those with lower incomes and those in cities. Combining data on many cohorts, we then show that large increases in gasoline prices between the ages of 15 and 18 significantly reduce both (i) the likelihood of driving a private automobile to work and (ii) total annual vehicle miles traveled later in life, while also increasing public transit use. Differences in driver license age requirements generate additional variation in the formative window. These effects cannot be explained by contemporaneous income and do not appear to be only due to increased costs from delayed driving skill acquisition. Instead, they seem to reflect the formation of preferences for driving or persistent changes in the perceived costs of driving.

Keywords: formative experiences, preference persistence, path dependence, driving behavior, gasoline price

JEL Classification: D120, D900, L910, Q410, R410

Suggested Citation

Severen, Christopher and van Benthem, Arthur, Formative Experiences and the Price of Gasoline (2019). CESifo Working Paper No. 7757. Available at SSRN: https://ssrn.com/abstract=3428829

Christopher Severen (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Arthur Van Benthem

University of Pennsylvania - Business & Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
United States
215-898-3013 (Phone)

HOME PAGE: http://bepp.wharton.upenn.edu/profile/21174/

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