Department of Agricultural and Resource Economics
Demand for gasoline is more price-inelastic than commonly thought
- Author(s): Havranek, Tomas
- Irsova, Zuzana
- Janda, Karel
- et al.
One of the most frequently examined statistical relationships in energy economics has been the price elasticity of gasoline demand. We conduct a quantitative survey of the estimates of elasticity reported for various countries around the world. Our meta-analysis indicates that the literature suffers from publication selection bias: insignificant or positive estimates of the price elasticity are rarely reported, although implausibly large negative estimates are reported regularly. In consequence, the aver- age published estimates of both short- and long-run elasticities are exaggerated twofold. Using mixed effects multilevel meta-regression, we show that after correction for publication bias the average long-run elasticity reaches -0:31 and the average short-run elasticity only -0:09.