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

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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
Publication statusPublished - 30 Jun 2017
Event23rd Annual Conference of the European Association of Environmental and Resource Economists (EAERE) - Megaron Athens International Conference Centre, Athens, Greece
Duration: 28 Jun 20171 Jul 2017

Conference

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

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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.