Car travel demand: spillovers and asymmetric price effects in a spatial setting

A novel analysis framework for the spatial aspects of car travel, measured by vehicle miles travelled (VMT), is introduced in this paper. The specification of a dynamic Spatial Durbin Model (SDM) enables the analysis of VMT spatial spillovers and diffusion between neighbouring areas in the short and long-run. The framework is further developed to capture and introduce to a spatial setting potential asymmetry and hysteresis that can reflect reference dependence and habits. A panel dataset is compiled at sub-regional level, based on official car mileage recordings in England and Wales. In addition to the inelastic long-run responses of VMT to fuel price (-0.124) and income (0.116) changes, the results illustrate asymmetries and hysteresis in price elasticities with a significant spatial component. The impact magnitude on VMT from a number of factors, such as alternative fuel use, fuel deserts in rural areas, road network and car fleet characteristics, is also estimated. The results are consistent with the car use saturation hypothesis through the positive impact of motorization rate to VMT. The negative effect of public transport infrastructure on car travel is only significant in the spatial models. The paper demonstrates the applicability and importance of spatial econometrics in transport research.