Elasticity of Long Distance Travelling

With data from the Danish expenditure survey for 12 years 1996 through 2007, this study analyses household expenditures for long distance travelling. Household expenditures are examined at two levels of aggregation having the general expenditures on transportation and leisure relative to five other aggregated commodities at the highest level, and the specific expenditures on plane tickets and travel packages at the lowest level. The Almost Ideal Demand System is applied to determine the relationship between expenditures on transportation and leisure and all other purchased non-durables within a household. Due to a high share of corner solutions among the expenditures on plane tickets and package travelling, the expenditures on these specific commodities are examined with a Tobit approach. The model results find both plane tickets and travel packages to be luxury goods. It also states that travel packages has higher income elasticity of demand than plane tickets but also higher than transportation and leisure in general. The findings within price sensitiveness are not as sufficient estimated, but the model results indicate that travel packages is far more price elastic than plane tickets which are actually found close to be unit elastic.