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Gasoline and diesel demand elasticities: a consistent estimate across the EU-28

Zeleke, Abenezer (2016). Gasoline and diesel demand elasticities: a consistent estimate across the EU-28. Uppsala: (NL, NJ) > Dept. of Economics, Sveriges lantbruksuniversitet. Working paper series / Swedish University of Agricultural Sciences, Department of Economics ; 2016:12
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Abstract

Several studies have examined gasoline and diesel demand elasticities. These studies usually cover a single country or a group of countries that belong to a specific economic alliance such as the OECD. Even though consistent elasticities are necessary to analyze and forecast the effects of EU-level fuel policy, there has not yet been a study that provides consistent gasoline and diesel demand elasticity across the EU-28. This study set out to address this literature gap by estimating price and income elasticities for gasoline and diesel. For this purpose, an ARDL Bounds testing approach is used to test the existence of a long-run relationship and estimate the elasticities. The estimation provides short and long-run price and income elasticities of gasoline and diesel demand for the EU-28 countries and shows the countries in which a long-run equilibrium relationship is confirmed. The results show that there is a high variation in elasticity estimates between the EU-28 countries. The estimated long-run elasticities are higher than their short-run counterparts, which is in line with expectations based on the existing literature. The short and long-run income elasticities of gasoline and diesel demand are found to be more elastic than their price equivalents. This implies that if a charge on fuel is designed to decrease emissions by increasing the price, the charge needs to rise at a higher rate than income. An analysis of the EU’s longterm emission and fuel consumption reduction targets shows that, with the current tax scheme, it cannot be guaranteed that emission targets will be achieved and thus a more stringent fuel tax policy is essential.

Authors/Creators:Zeleke, Abenezer
Title:Gasoline and diesel demand elasticities: a consistent estimate across the EU-28
Series/Journal:Working paper series / Swedish University of Agricultural Sciences, Department of Economics (1401-4068)
Year of publishing :2016
Number:2016:12
Number of Pages:41
Place of Publication:Uppsala
Publisher:Department of Economics, Swedish University of Agricultural Sciences
ISSN:1401-4068
Language:English
Publication Type:Report
Article category:Other scientific
Full Text Status:Public
Agris subject categories.:E Economics, development, and rural sociology > E11 Land economics and policies
E Economics, development, and rural sociology > E70 Trade, marketing and distribution
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
Agrovoc terms:petrol, diesel oil, price elasticity, transport, taxes, pollution control, European Union
Keywords:gasoline demand, diesel demand, price elasticity, income elasticity, ARDL Bounds testing, Transport, EU-28, EU 2030 emissions targets
URN:NBN:urn:nbn:se:slu:epsilon-e-3825
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-e-3825
ID Code:13860
Faculty:NJ - Fakulteten för naturresurser och jordbruksvetenskap
Department:(NL, NJ) > Dept. of Economics
Deposited By: SLUpub Connector
Deposited On:05 Dec 2016 12:15
Metadata Last Modified:08 Sep 2017 11:30

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