Are the rich reaching saturation: Income and fuel price elasticities of car ownership and use

We estimate the income and fuel price elasticities of household vehicle kilometres travelled (VKT) and car ownership. To model the VKT, we apply a discrete-continuous model on registrAy micro panel data, covering all Swedish households from 1999 to 2018. We model two joint choices: car ownership and VKT conditional on car ownership, where the elasticity of VKT from these two choices are obtained by using the Two-Part model. We account for unobserved household effects using a correlated random effects specification and take household adjustments into account by including lagged values of fuel prices and income. Our preferred model yields a long-run income elasticity of 0.45 for private VKT, where close to two-thirds of the effect comes from the income elasticity of car ownership. The long-run fuel price elasticity of private VKT is −1.03, with the response in VKT among car owners being larger than the response in car ownership.