"The Effect of Improved Fuel Economy on Vehicle Miles Traveled: Estimating
the Rebound Effect Using U.S. State
Data, 1966-2001"
Kenneth Small and Kurt Van Dender
Department of Economics
University of California, Irvine
We estimate the rebound effect for motor vehicles, by which improved fuel
efficiency causes additional travel, using a panel of US states for 1966-2001.
Our model accounts for endogenous changes in fuel efficiency, distinguishes
between autocorrelation and lagged effects, includes a measure of the stringency
of fuel-economy standards, and interacts the rebound effect with income. At
sample averages of variables, our 3SLS estimates of the short- and long-run
rebound effect are 4.7% and 22.0%. But they decline substantially with income:
with variables at 1997-2001 levels they become 2.6% and 12.1%, considerably
smaller than typically assumed for policy analysis.
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