| Joungyeo Angela No, University of Toronto Adonis Yatchew, University of Toronto |
| Household Gasoline Demand in Canada |
| Session: C-6-2 Sunday 13 August 2000 by Yatchew, Adonis |
| Recent studies by Hausman and Newey (1995,1998) and Schmalensee and Stoker (1999) focus respectively on price and demographic effects in analyzing U.S. household demand for gasoline. The purpose of our note is fourfold: to estimate a semiparametric model of gasoline demand using recent Canadian household data; to determine whether the inclusion of both price and demographic variables in the same model would likely have altered the Hausman and Newey or Schmalensee and Stoker results; to determine whether separate estimation by grade of gasoline yields different estimates; and, to test whether the price variable is endogenous. As a by-product, we illustrate the ease with which differencing techniques can be used to analyze the partial linear model. Our estimates reveal strong demographic effects which are numerically consistent with the findings of Schmalensee and Stoker. Our estimated price elasticity is close to that found by Hausman and Newey and our income elasticity lies between the two papers. We find that price is unrelated to demographic and other variables, thus the absence of demographics in Hausman and Newey and reliable price data in Schmalensee and Stoker would appear not to compromise either set of results. Separate estimation by grade of gasoline does not yield substantively different estimates. Although nonparametric price effects display patterns similar to those found by Hausman and Newey, a log- linear specification for the price effect cannot be rejected. We do not find evidence of endogeneity of the price of gasoline. |