A dynamic model of car fuel-type choice and mobility

This study examines the relationship between car mobility and the choice of alternative-fuel versus gasoline cars in the Netherlands during the 1984-1988 period. One alternative fuel, liquified petroleum gas (LPG), is priced considerably lower than gasoline and is available at service stations throughout the Netherlands. Conversion costs lead to higher capital costs for LPG cars. A joint continuous/discrete multivariate demand model is applied to panel data to quantify the relationships among fuel-type choice, annual car usage and commuting distance, and to determine the effects of commuting subsidies, fixed and variable work locations, rail season tickets, and household socioeconomic characteristics. The model has lagged effects, individual-specific time-invariant terms, period effects, and compensation for panel conditioning and attrition. Results show that higher levels of car use favor choice of LPG cars, but the lower operating costs in turn lead to increases in car use. This latent demand for car travel is accentuated by travel reimbursements provided by employers.