Your mileage may vary: Have road-fuel demand elasticities changed over time in middle-income countries?

This paper determines whether road-fuel (gasoline plus diesel) income and price elasticities have changed over time in middle-income countries. To do so, the paper considers a balanced panel of 26 countries that spans 1990-2019. Also, the paper employs two methods that fully allow for cross-sectional heterogeneity, but vary to the extent that they allow for temporal heterogeneity: rolling window, mean group regressions and mean observation OLS, which estimates coefficients for each cross-section and each time period. While the elasticities demonstrate some temporal heterogeneity, such variances are less pronounced than the corresponding country-level heterogeneity. At any point in time, for middle-income countries, the average road-fuel income elasticity is between 1 and 0.8, and the average road-fuel price elasticity is very near -0.2. Lastly, we find no strong evidence that road-fuel demand has become saturated or that efficiency improvements have made consumers less price sensitive in middle-income countries.

Automated summary

This study examines whether road-fuel income and price elasticities have changed over time in middle-income countries. The findings suggest that while there is some temporal heterogeneity, it is less pronounced than the country-level heterogeneity. On average, the road-fuel income elasticity in middle-income countries ranges between 1 and 0.8, and the road-fuel price elasticity is close to -0.2. Additionally, there is no strong evidence indicating that road-fuel demand has become saturated or that efficiency improvements have made consumers less price sensitive in middle-income countries.