Estimating the elasticities of gasoline demand for urban households in China

CAO Jing; HU Wenhao

doi:10.16511/j.cnki.qhdxxb.2018.22.026

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Journal of Tsinghua University(Science and Technology) ›› 2018, Vol. 58 ›› Issue (5) : 489-493. DOI: 10.16511/j.cnki.qhdxxb.2018.22.026

ECONOMICS AND MANAGEMENT

Estimating the elasticities of gasoline demand for urban households in China

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Abstract

To encourage low-carbon lifestyles and reduce vehicle air pollution, the Chinese government needs to implement effective policy tools to regulate gasoline consumption, such as gasoline taxes. This paper uses the Probit and Translog models to estimate gasoline price and income elasticities using urban household consumption data for 1992-2009. The results show that the household characteristics significant impact the gasoline consumption of urban households in China. The micro-data elasticities results are similar to those in western countries. The gasoline demand price elasticity is-0.445 and the sophisticated income elasticity is 1.307. Thus, a fuel tax can effectively regulate driving behavior as well as gasoline consumption. In addition, these results show that a gasoline tax is also progressive in China that reduces gasoline consumption and pollutant emissions without negative effects on household welfare.

Key words

gasoline demand / price elasticity / income elasticity / Probit model / Translog model

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CAO Jing, HU Wenhao. Estimating the elasticities of gasoline demand for urban households in China[J]. Journal of Tsinghua University(Science and Technology). 2018, 58(5): 489-493 https://doi.org/10.16511/j.cnki.qhdxxb.2018.22.026

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