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The Response Of Consumer Spending To Changes In Gasoline Prices
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Book Synopsis The Response of Consumer Spending to Changes in Gasoline Prices by : Michael Gelman
Download or read book The Response of Consumer Spending to Changes in Gasoline Prices written by Michael Gelman and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sudden, large drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, daily transaction-level data for a large panel of individuals. The estimated marginal propensity to consume (MPC) is approximately one, a higher estimate than estimates found in less comprehensive or well-measured data. This estimate takes into account the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects.
Book Synopsis The Consumer Response to Gasoline Price Changes by : Kenneth Thomas Gillingham
Download or read book The Consumer Response to Gasoline Price Changes written by Kenneth Thomas Gillingham and published by Stanford University. This book was released on 2011 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: When gasoline prices rise, people notice: the news is filled with reports of pinched household budgets and politicians feeling pressure to do something to ameliorate the burden. Yet, raising the gasoline tax to internalize externalities is widely considered by economists to be among the most economic efficiency-improving policies we could implement in the transportation sector. This dissertation brings new evidence to bear on quantifying the responsiveness to changing gasoline prices, both on the intensive margin (i.e., how much to drive) and the extensive margin (i.e., what vehicles to buy). I assemble a unique and extremely rich vehicle-level dataset that includes all new vehicle registrations in California 2001 to 2009, and all of the mandatory smog check program odometer readings for 2002 to 2009. The full dataset exceeds 49 million observations. Using this dataset, I quantify the responsiveness to gasoline price changes on both margins, as well as the heterogeneity in the responsiveness. I develop a novel structural model of vehicle choice and subsequent utilization, where consumer decisions are modeled in a dynamic setting that explicitly accounts for selection on unobserved driving preference at both the time of purchase and the time of driving. This utility-consistent model allows for the analysis of the welfare implications to consumers and government of a variety of different policies, including gasoline taxes and feebates. I find that consumers are responsive to changing gasoline prices in both vehicle choice and driving decisions, with more responsiveness than in many recent studies in the literature. I estimate a medium-run (i.e., roughly two-year) elasticity of fuel economy with respect to the price of gasoline for new vehicles around 0.1 for California, a response that varies by whether the vehicle manufacturer faces a tightly binding fuel economy standard. I estimate a medium-run elasticity of driving with respect to the price of gasoline around -0.15 for new personal vehicles in the first six years. Older vehicles are driven much less, but tend to be more responsive, with an elasticity of roughly -0.3. I find that the vehicle-level responsiveness in driving to gasoline price changes varies by vehicle class, income, geographic, and demographic groups. I also find that not including controls for economic conditions and not accounting for selection into different types of new vehicles based on unobserved driving preference tend to bias the elasticity of driving away from zero -- implying a greater responsiveness than the true responsiveness. This is an important methodological point, for much of the literature estimating similar elasticities ignores these two issues. These results have significant policy implications for policies to reduce gasoline consumption and greenhouse gas emissions from transportation. The relatively inelastic estimated responsiveness on both margins suggests that a gasoline tax policy may not lead to dramatic reductions in carbon dioxide emissions, but is a relatively non-distortionary policy instrument to raise revenue. When the externalities of driving are considered, an increased gasoline tax may not only be relatively non-distortionary, but even economic efficiency-improving. However, I find that the welfare changes from an increased gasoline tax vary significantly across counties in California, an important consideration for the political feasibility of the policy. Finally, I find suggestive evidence that the ``rebound effect'' of a policy that works only on the extensive margin, such as a feebate or CAFE standards, may be closer to zero than the elasticity of driving with respect to the price of gasoline. This suggestive finding is particularly important for the analysis of the welfare effects of any policy that focuses entirely on the extensive margin.
Book Synopsis The Distributional Implications of the Impact of Fuel Price Increases on Inflation by : Mr. Kangni R Kpodar
Download or read book The Distributional Implications of the Impact of Fuel Price Increases on Inflation written by Mr. Kangni R Kpodar and published by International Monetary Fund. This book was released on 2021-11-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
Book Synopsis Revisiting the Income Effect by : Dora Gicheva
Download or read book Revisiting the Income Effect written by Dora Gicheva and published by . This book was released on 2010 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the importance of income effects in purchase decisions for every-day products by analyzing the effect of gasoline prices on grocery expenditures. Using detailed scanner data from a large grocery chain as well as data from the Consumer Expenditure Survey (CES), we show that consumers re-allocate their expenditures across and within food-consumption categories in order to offset necessary increases in gasoline expenditures when gasoline prices rise. We show that gasoline expenditures rise one-for-one with gasoline prices, consumers substitute away from food-away-from-home and towards groceries in order to partially offset their increased expenditures on gasoline, and that within grocery category, consumers substitute away from regular shelf-price products and towards promotional items in order to save money on overall grocery expenditures. On average, consumers are able to decrease the net price paid per grocery item by 5-11% in response to a 100% increase in gasoline prices. Our results show that consumers respond to permanent changes in income from gasoline prices by substituting towards lower-cost food at the grocery store and lower priced items within grocery category. The substitution away from full-priced items towards sale items has implications for microeconomic discrete-choice demand models as well as for macroeconomic inflation measures that typically do not incorporate frequently changing promotional prices.
Book Synopsis Effects of Gasoline Prices on Driving Behavior and Vehicle Markets by : David Austin
Download or read book Effects of Gasoline Prices on Driving Behavior and Vehicle Markets written by David Austin and published by Government Printing Office. This book was released on 2008 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Gasoline prices and driving behavior. Volume of traffic ; Speed of traffic ; Applicability of findings to other regions of the United States -- Gasoline prices and vehicle markets. Market shares for cars and light trucks ; Gasoline prices and vehicle market status ; Changes in new vehicle fuel economy and pricing ; Changes in the used vehicle market -- Study data -- Analytical approach and economic results.
Book Synopsis Oil Prices and Consumer Spending by : Yash P. Mehra
Download or read book Oil Prices and Consumer Spending written by Yash P. Mehra and published by DIANE Publishing. This book was released on 2008-10 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical evidence suggests that oil price increases have a negative effect on spending whereas oil price declines have no effect. The estimated negative effect of an oil price increase on spending is larger if we focus on oil price increases that occur after a period of stable oil prices (net oil price increases), or if spending includes durables, the latter suggesting the possible negative influence of energy prices on the purchase of big-ticket consumption goods. Furthermore, the estimated oil price coefficients in the consumption equation do not show parameter instability during the 1980s, the period when oil prices moved widely for the first time in both directions. Charts and tables.
Book Synopsis Gasoline price changes the dynamic of supply, demand, and competition. by :
Download or read book Gasoline price changes the dynamic of supply, demand, and competition. written by and published by DIANE Publishing. This book was released on 2005 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Evidence of a Shift in the Short-run Price Elasticity of Gasoline Demand by : Jonathan E. Hughes
Download or read book Evidence of a Shift in the Short-run Price Elasticity of Gasoline Demand written by Jonathan E. Hughes and published by . This book was released on 2006 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the sensitivity of gasoline demand to changes in prices and income has important implications for policies related to climate change, optimal taxation and national security, to name only a few. While the short-run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of these studies focus on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that current demand elasticities differ from these previous periods, as transportation analysts have hypothesized that behavioral and structural factors over the past several decades have changed the responsiveness of U.S. consumers to changes in gasoline prices. In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980. The estimated short-run income elasticities range from 0.21 to 0.75 and when estimated with the same models are not significantly different between the two periods.
Book Synopsis The Influence of Gasoline Prices and Consideration Sets on the Fuel Economy of New Vehicle Sales by : James David Ruckdaschel
Download or read book The Influence of Gasoline Prices and Consideration Sets on the Fuel Economy of New Vehicle Sales written by James David Ruckdaschel and published by . This book was released on 2020 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the factors that influence consumer investment in fuel economy when purchasing a new vehicle is critical for stakeholders including environmental policy makers, automotive manufacturers and oil companies. The energy economics literature shows that consumers are relatively rational in how much fuel economy they purchase in response to changes in gas price. Yet the marketing literature suggests that consumers only consider a small number of vehicle makes/models - as few as 2-6 - when making their purchase decision. Given this, we consider the extent to which consumer’s rational response to gas price changes is achieved by including different vehicles in their consideration set, versus choosing differently from within their consideration set. We analyze data from 210,885 responses to a new vehicle customer satisfaction survey collected over 9 years in which respondents state the vehicles they considered purchasing in addition to the vehicle they ultimately purchased. Our findings show that as gasoline prices rise, their purchased vehicle fuel economy increases more than their consideration set average fuel economy does, with both increasing. This is the result of considering more fuel-efficient vehicles and also purchasing higher within their consideration set fuel economy range. The degree to which the consumer adjusts is shown to correspond to the importance they place on the environment during their shopping process. Increased consideration and adoption of alternative fuel vehicles are found to be one mechanism the consumer uses to make these adjustments. Finally, we highlight how changing gasoline prices result in differing consideration set behavior for buyers of low and high fuel economy vehicles.
Book Synopsis Retail Gas Prices by : United States
Download or read book Retail Gas Prices written by United States and published by . This book was released on 2008 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand by : John Coglianese
Download or read book Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand written by John Coglianese and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We demonstrate that anticipatory behavior provides an important explanation for this result. We provide evidence that gasoline buyers increase gasoline purchases before tax increases and delay gasoline purchases before tax decreases. This intertemporal substitution renders the tax instrument endogenous, invalidating conventional IV analysis. We show that including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower and more plausible elasticity estimates. Our analysis has implications more broadly for the IV analysis of markets in which buyers may store purchases for future consumption.
Book Synopsis Pain at the pump : the differential effect of gasoline prices on new and used automobile markets by : Meghan R. Busse
Download or read book Pain at the pump : the differential effect of gasoline prices on new and used automobile markets written by Meghan R. Busse and published by . This book was released on 2009 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dramatic increase in gasoline prices from close to $1 in 1999 to $4 at their peak in 2008 made it much more expensive for consumers to operate an automobile. In this paper we investigate whether consumers have adjusted to gasoline price changes by altering what automobiles they purchase and what prices they pay. We investigate these effects in both new and used car markets. We find that a $1 increase in gasoline price changes the market shares of the most and least fuel-efficient quartiles of new cars by +20% and -24%, respectively. In contrast, the same gasoline price increase changes the market shares of the most and least fuel-efficient quartiles of used cars by only +3% and -7%, respectively. We find that changes in gasoline prices also change the relative prices of cars in the most fuel-efficient quartile and cars in the least fuel-efficient quartile: for new cars the relative price increase for fuel-efficient cars is $363 for a $1 increase in gas prices; for used cars it is $2839. Hence the adjustment of equilibrium market shares and prices in response to changes in usage cost varies dramatically between new and used markets. In the new car market, the adjustment is primarily in market shares, while in the used car market, the adjustment is primarily in prices. We argue that the difference in how gasoline costs affect new and used automobile markets can be explained by differences in the supply characteristics of new and used cars.
Book Synopsis Dynamic Fuel Price Pass-Through by : Mr.Kangni R Kpodar
Download or read book Dynamic Fuel Price Pass-Through written by Mr.Kangni R Kpodar and published by International Monetary Fund. This book was released on 2017-01-18 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the dynamic pass-through of crude oil price shocks to retail fuel prices using a novel database on monthly retail fuel prices for 162 countries. The impulse response functions suggest that on average, a one cent increase in crude oil prices per liter translates into a 1.2 cent increase in the retail gasoline price at peak level six months after the shock. However, the estimates vary significantly across country groups, ranging from about 0.5 cent in MENA countries to two cents in advanced economies. The results also show that positive oil price shocks have a larger impact than negative price shocks on the retail gasoline price. Finally, the paper underscores the importance of the new dataset in refining estimates of the fiscal cost of incomplete pass-through.
Book Synopsis Prices and Consumer Information by : Alex Maurizi
Download or read book Prices and Consumer Information written by Alex Maurizi and published by . This book was released on 1978 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Who is Exposed to Gas Prices? by : Meghan R. Busse
Download or read book Who is Exposed to Gas Prices? written by Meghan R. Busse and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many consumers are keenly aware of gasoline prices, and consumer responses to gasoline prices have been well studied. In this paper, by contrast, we investigate how gasoline prices affect the automobile industry: manufacturers and dealerships. We estimate how changes in gasoline prices affect equilibrium prices and sales of both new and used vehicles of different fuel economies. We investigate the implications of these effects for individual auto manufacturers, taking into account differences in manufacturers' vehicle portfolios. We also investigate effects on manufacturers' affiliated dealership networks, including effects implied by the changes in used vehicle market outcomes.
Book Synopsis Gasoline Prices and Expenditures in 2011 by : Mark Cooper
Download or read book Gasoline Prices and Expenditures in 2011 written by Mark Cooper and published by . This book was released on 2011 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past decade, the Consumer Federation of America (CFA) has examined the issue of fuel economy and mileage standards (Corporate Average Fuel Economy or CAFE standards) of cars and light trucks as well as the price of gasoline from the point of view of economics, technology and public opinion.1 In this report, we find that concern about gasoline prices is higher than in any of the previous 11 surveys we conducted. This is not surprising, given the headlines of the past two weeks. Looking past the headlines, we find important shifts in the economics and in public opinion about gasoline consumption that have changed the environment for auto makers and policy makers. The problem that President George W. Bush, an oil man from Texas, declared to be a national “oil addiction” has become a middle class problem. Over the past six years, Congress and the executive branch have begun to respond, putting in place the tools to do what Presidents and Congresses have all recognized needs to be done since the first oil price spike nearly 40 years ago – dramatically change the trajectory of United States gasoline consumption. This report reviews the harsh reality that American gasoline consumers face today, a reality that sets the stage for critically important policy decisions that have already been teed up for later this year.
Book Synopsis The Signaling Effect of Gasoline Taxes and Its Distributional Implications by : Silvia Tiezzi
Download or read book The Signaling Effect of Gasoline Taxes and Its Distributional Implications written by Silvia Tiezzi and published by . This book was released on 2017 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes and tests a better defined interpretation of the different responses of gasoline demand to tax changes and to market-related price changes. Namely, the signaling effect of gasoline taxes is one that impacts on long-run consumer decisions in addition to the incentives provided by tax-inclusive gasoline prices. Our hypothesis is tested using a complete demand system augmented with information on gasoline taxes and fitted to household-level data from the 2006 to 2013 rounds of the US Consumer Expenditure survey. Information on gasoline taxes is found to be a significant determinant of household demand additional to tax-inclusive gasoline prices. The equity implications are examined by contrasting the incidence across income distribution of a simulated $0.22/gallon tax increase to that of a market-related price increase equal in size. The tax increase is clearly regressive, slightly more than the market-related price increase. However, regressivity is by no means a reason to give up gasoline taxes as an instrument for reducing gasoline consumption externalities. Their high effectiveness in reducing gasoline demand implies that small tax increases can substantially improve the environment while minimizing the related distributional effects. Also, gasoline taxes generate revenue that can be used to offset their regressivity.
