The demand for car ownership: Evidence from Israeli data

The continued and persistent surge in traffic volumes in big urban areas have generated much interest among researchers and policy makers in understanding the issues involved. Economists undertook major efforts to study and understand the basic factors affecting the demand for travel in general and the demand for car ownership in particular. The purpose of this paper is to analyze the role played by permanent income as a major factor which determines the demand for car ownership. Such an extension is possible with data bases which rely on Family Expenditure Surveys where recorded total expenditure on consumption can readily be used to construct a measure representing permanent income. The results obtained in the subsequent analysis are extremely encouraging. They lend support to the fundamental hypothesis of this paper that permanent income plays a role in determining car ownership. While current income performs well in explaining the probability of owning a car its replacement with a variable representing permanent income resulted in an improvement in the fit of a logit and a multi-logit models. In addition to the income variables other variables that have been shown to be important determinants of car ownership are: the number of wage earners and city size.