Measuring the rebound effect with micro data

The rebound effect is the causal impact of an increase in fuel efficiency on the demand for car kilometres. The rebound effect has been studied in several different sectors (for a survey, see Greening et al. (2000)). Some recent studies have extensively focused on passenger transportation using macro data (see, Small and Van Dender (2007); Hymel et al. (2010)). However, the rebound effect is essentially a phenomenon that occurs at the level of the individual actor and it seems appropriate to investigate it on micro data as well. This is the purpose of the present paper. We estimate the rebound effect using individual Danish administrative register data. Central to the analysis is a demand equation for car kilometres in which the fuel price and fuel efficiency are the main explanatory variables. We start by imposing the restriction that only fuel cost per kilometre matter (as is suggested by conventional theory) but also estimate versions in which the coefficients for fuel price and fuel efficiency can differ. We use administrative register micro data over the period 20042010 to estimate the demand equation. We apply fixed-effect panel-data (first-diff.) techniques.