Scandinavian Working Papers in Economics

Nationaløkonomisk tidsskrift,
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A Dynamic Random Effects Multinomial Logit Model of Household Car Ownership

2007, Volume 2007, issue 1, pp. 83-100

Thomas Bue Bjørner () and Søren Leth-Petersen ()
Additional contact information
Thomas Bue Bjørner: AKF, Danish Institute of Governmental Research
Søren Leth-Petersen: Department of Economics, University of Copenhagen

Abstract: Using a large household panel we estimate demand for car ownership by means of a dynamic multinomial model with correlated random effects. Results suggest that the persistence in car ownership observed in the data should be attributed to both true state dependence and to unobserved heterogeneity (random effects). It also appears that random effect related to single and multiple car ownership are correlated, suggesting that the IIA assumption employed in simple multinomial models of car ownership is invalid. Relatively small elasticities with respect to income and car costs are estimated. It should, however, be noted that the level of state dependence is considerably larger for households with single car ownership as compared with multiple car ownership. This suggets that the holding of a car will be more affected by changes in the socioeconomic conditions of the household and by economic policy shocks.

Keywords: socioeconomic; household

JEL-codes: A10

Language: English

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