The Elasticity of Demand for Gasoline: A Semi-Parametric Analysis
Abstract
We use a semi-parametric conditional median as a robust alternative to the
parametric conditional mean to estimate the gasoline demand function. Our
approach protects against data and specification errors and may yield a more
reliable basis for public policy decisions that depend on accurate estimates
of gasoline demand. As a comparison, we also estimated the parametric
translog conditional mean model. Our semi-parametric estimates imply that
gasoline demand becomes more price elastic, but also less income elastic, as
incomes rise. In addition, we find that demand appears to become more price
elastic as prices increase in real terms.
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can be downloaded by clicking here.
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