Car Travel Demand: Spillovers and Asymmetric Price Effects in a Spatial Setting

What is it about?

Spatial Econometrics and vehicle miles traveled (VMT): The paper provides a theoretical and methodological framework for spatial panel model applications to aggregate car travel demand. We go one step further to capture asymmetry in car travel demand. Asymmetric responses are caused by consumers weighing losses more than equivalent sized gains. We employ car mileage data that are recorded during the annual test of vehicle road-worthiness, called MOT in the UK. This forgoes the common issues of survey self-reporting, or trying to estimate car mileage from proxies.

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Why is it important?

This paper provides a link between disaggregate models, which focus on behavioral effects and deal with space and networks in detail, and more aggregate demand models that typically ignore these issues, not to mention their combination. The empirical results provide unique insights to the relevant economic debate, demand forecasting at aggregate levels, transportation policy and planning: a) The effect of public transport infrastructure on car travel is significant only in the spatial models, emphasizing the importance of including the spatial dimension when analyzing such effects. b) The findings are consistent with car use saturation, as the positive effects of the motorization rate capture car dependence rather than car use intensity. c) The results underline the potential significance of lower speeds and congestion constraints in the long-run “evolution” of car use. d) The reactions to petrol price changes exhibits asymmetries that potentially indicate loss aversion and deference dependence. e) We capture the “fuel desert” effects in rural areas, brought about by the number of petrol stations affecting vehicle miles traveled due to refueling access.

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