Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis

Gioele Figus, J. Kim Swales, Karen Turner

Research output: Contribution to conferencePaper

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.

Conference

Conference23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE)
CountryGreece
CityAthens
Period28/06/171/07/17

Fingerprint

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

  • private transport
  • consumption
  • macroeconomics
  • computable general equilibrium model
  • household energy consumption

Cite this

Figus, G., Swales, J. K., & Turner, K. (2017). Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis. Paper presented at 23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) , Athens, Greece.
Figus, Gioele ; Swales, J. Kim ; Turner, Karen. / Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis. Paper presented at 23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) , Athens, Greece.
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Figus, G, Swales, JK & Turner, K 2017, 'Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis' Paper presented at 23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) , Athens, Greece, 28/06/17 - 1/07/17, .

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.

2017. Paper presented at 23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) , Athens, Greece.

Research output: Contribution to conferencePaper

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AU - Swales, J. Kim

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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.

AB - 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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KW - consumption

KW - macroeconomics

KW - computable general equilibrium model

KW - household energy consumption

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Figus G, Swales JK, Turner K. Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis. 2017. Paper presented at 23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) , Athens, Greece.