Investigating the Effect of Gasoline Prices on Transit Ridership and Unobserved Heterogeneity

Abstract

Based on a unique scanner panel data set on debit and credit card transactions, we examined the effect of gasoline prices on individual choices between private vehicle use and public transit ridership. The unique feature of our data allowed us to address possible heterogeneity in the effect of gasoline prices and to explicitly incorporate the link between private vehicle use and public transit ridership. A series of empirical analyses reveal that there is significant heterogeneity in the effect of gasoline prices on fuel consumption and that financial constraints and commitment to vehicle use determine individual sensitivities to the price of gasoline. The substantive empirical knowledge provided about individual decisions concerning transit modes contributes meaningful implications and effective guidance for practitioners and policymakers.

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