Does the Substitutability of Public Transit Affect Commuters’ Response to Gasoline Price Changes?

Resources for the Future Discussion Paper No.12-29

39 Pages Posted: 26 Jul 2012 Last revised: 30 Jul 2012

See all articles by Elisheba Spiller

Elisheba Spiller

Environmental Defense Fund

Heather Stephens

affiliation not provided to SSRN

Christopher Timmins

Duke University - Department of Economics

Allison Smith

University of Virginia, School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: July 18, 2012

Abstract

This paper determines the extent to which gasoline price elasticity is affected by the availability of a substitute for driving — public transportation. Measuring the substitutability of public transportation presents an important practical difficulty. To address this, we predict individuals’ commute times by private and public transit conditional upon their observable characteristics and create a measure of substitutability between the two modes based on transit times. This allows us to measure the effect of public transportation on commuters’ sensitivity to gasoline prices. The interaction of gasoline price with our constructed substitutability measure is found to have a significant effect on annual vehicle miles traveled (VMT), indicating that investments in public transit could play an important role in altering motorists’ sensitivity to gasoline prices and increasing the effectiveness of a gasoline tax. However, we find evidence to support a policy of increasing public transit accessibility only in the presence of increased gasoline taxes.

Keywords: public transportation, elasticity, commuting, gasoline prices

JEL Classification: Q0, H0

Suggested Citation

Spiller, Elisheba and Stephens, Heather and Timmins, Christopher D. and Smith, Allison, Does the Substitutability of Public Transit Affect Commuters’ Response to Gasoline Price Changes? (July 18, 2012). Resources for the Future Discussion Paper No.12-29, Available at SSRN: https://ssrn.com/abstract=2113581 or http://dx.doi.org/10.2139/ssrn.2113581

Elisheba Spiller (Contact Author)

Environmental Defense Fund ( email )

257 Park Avenue South
New York, NY 10010
United States

Heather Stephens

affiliation not provided to SSRN ( email )

Christopher D. Timmins

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1809 (Phone)
919-684-8974 (Fax)

Allison Smith

University of Virginia, School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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