Does the Quality of Public Transit Affect Commuters’ Response to Gasoline Price Changes?

The effect of public transportation on commuters' sensitivity to gas prices is examined using a proxy for the quality of public transportation. This proxy is measured as the difference in the individual's predicted commute times by private transit and public transit, estimated using the individual's observable characteristics. The interaction of gasoline price with this measure is found to have a significant effect on annual vehicle miles traveled. Further, there is a strong correlation between the quality of public transit and elasticity of demand. This indicates that public transit could play an important role in increasing the effectiveness of gasoline taxes. This has timely policy implications with regard to the federal allocations for public transit infrastructure in the 2009 stimulus bill. 3 Acknowledgements First and foremost, I would like to thank Professor Christopher Timmins for his guidance and patience. I am grateful for the helpful feedback provided by Professor Kent Kimbrough and the students of ECON 199S throughout the process. Finally, Joel Herndon greatly helped with my data, and Paul Dudenhefer provided valuable writing advice. This paper would not have been possible without these individuals' generosity with their time and expertise.