Abstract
We provide estimates of the rebound effect for car transport in Denmark, using a rich data set with individual
household data on car use, fuel efficiency, and car as well as household characteristics. A demand model is
estimated in first differences; the availability of households in the sample that replaced their car during the
period of observation combined with information on their driving behaviour before and after the car switch
allows us to identify the rebound effect. Endogeneity is taken into account by using appropriate instruments.
Results include the following. First, we reject the ‘conventional’ formulation in which only fuel cost per
kilometre matters. Second, the selection equation confirms that higher fuel prices induce households to
switch car. Third, the results suggest the presence of a rebound effect that is on the lower end of the
estimates available in the literature. Specifically, our best estimate of the rebound effect is some 7.5%-10%.
Fourth, the fuel price sensitivity of the demand for kilometres appears to be declining with household
income, but we do not find a significant impact of income on the rebound effect. Finally, simulation results
indicate that the small rebound effect and changes in car characteristics in response to higher fuel prices
imply that -- compared to the reference scenario -- higher fuel prices lead to a substantial reduction in both
the demand for kilometres and in demand for fuel.
Original language | English |
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Number of pages | 30 |
Publication status | Published - 2015 |
Bibliographical note
TI 2015-039/VIII - Tinbergen Institute Discussion Paper.Keywords
- The rebound effect
- Fuel efficiency
- First difference models