Can a Reduction in Fuel Use Result from an Endogenous Technical Progress in Motor Vehicles? A Partial and General Equilibrium Analysis

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Abstract

In this paper we employ a partial equilibrium approach to model private transport consumption as a household self-produced commodity formed by vehicle and fuel use. We show that under certain conditions vehicle-augmenting technical improvements can reduce fuel use. We then extend the analysis through Computable General Equilibrium simulations for the UK in order to investigate the wider implications of vehicle-augmenting efficiency improvements when prices and nominal income are endogenous. With a conventional macroeconomic approach, improvements in the efficiency of household consumption simply change the composition of household demand. However, when we adjust the consumer price index for changes in the price of private transport service (not observable via a market price), as advocated in Gordon (2016) there is an additional supply-side stimulus to competitiveness.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-51
Number of pages52
Volume17
Publication statusPublished - 31 May 2017

Publication series

NameDiscussion Papers in Economics
PublisherUniversity of Strathclyde
No.5
Volume17

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Keywords

  • transport policy
  • Computable General Equilibrium simulations
  • energy efficiency

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