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

Research output: Working paperDiscussion paper

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.
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

Fingerprint

Chemical analysis
Motor vehicles
Technical progress
General equilibrium analysis
Partial equilibrium
Competitiveness
Simulation
Household consumption
Income
Household
Consumer price index
Macroeconomics
Market price
Price improvement
Commodities
Computable general equilibrium
Supply side
Household demand

Keywords

  • transport policy
  • Computable General Equilibrium simulations
  • energy efficiency

Cite this

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title = "Can a Reduction in Fuel Use Result from an Endogenous Technical Progress in Motor Vehicles? A Partial and General Equilibrium Analysis",
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.",
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Can a Reduction in Fuel Use Result from an Endogenous Technical Progress in Motor Vehicles? A Partial and General Equilibrium Analysis. / Figus, Gioele; Swales, J Kim; Turner, Karen.

Glasgow : University of Strathclyde, 2017. p. 1-51 (Discussion Papers in Economics; Vol. 17, No. 5).

Research output: Working paperDiscussion paper

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N2 - 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.

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