7 which includes both cross-sectional and time series information.1<sup>0</sup> Studies of g11 three types measure the effects of economic, demographic, and geographic variables on the levels and rates of motorization, using variables such as per capita income, vehicle prices, fuel prices, population density, degree of urbanization, and availability and prices of competing transport modes.

# _4.1 Income elasticities of motor vehicle ownership and use_

Because most motor vehicles are purchased by individuals, households, or firms and are privately owned, per capita income is perhaps the most important economic variable that determines the level of motorization. Representative estimates of income elasticities of motor vehicle ownership and use from previous studies are summarized in table 2. Many estimates indicate that motorization increases rapidly with income, though the elasticities vary. Some of the variation in income elasticities relates to income definition, but income elasticities also vary depending on the types of data and the methodologies used.'<sup>2</sup> Econometric Method of Car Ownership Forecasting in Discrete Areas," _MAU Notes 219,_ (London: Departnent of Environment, 1970); J. J. Bates, H. F. Gunn, and M. Roberts, "A Model of Household Car Ownership," _Traffic Engineering and Control,_ vol. 19 (November/December 1978), pp. 486-91, 562-66; Fred Mannering and Clifford Winston, "A Dynamic Empirical Analysis of Household Vehicle Ownership and Utilization," _Rand Journal of Economics,_ vol. 16 (summer 1985), pp. 215-36; Train, _Qualitative Choice Analysis;_ and David A. Hensher, Frank W. Milthorpe, and Nariida C. Smith, "The Demand for Vehicle Use in the Urban Household Sector," _Journal of Transport Economics and Policy,_ vol. 17, no. 3 (1990), pp. 11937.

10 Robert Pindyck, _The Structure of World Energy Demand_ (Cambridge, Mass: MIT Press, 1979); Kenneth Button, Ndoh Ngoe, and John Hine, "Modeling Vehicle Ownership and Use in Low-Income Countries," _Journal of Transport Economic and Policy,_ vol. 27 (January 1993), pp.51-67; Olof Johansson and Lee Schipper, "Measuring the Long-Run Fuel Demand of Cars," _Journal of Transport Economics and Policy,_ vol. 31 (September 1997), pp. 277-92; Gregory K. Ingram and Zhi Liu, "Motorization and the Provision of Roads in Countries and Cities," Policy Research Working Paper 1842 (Washington, D.C.: World Bank, 1997); and Gregory K. Ingram and Zhi Liu, "Vehicles, Roads, and Road Use: Altemative Empirical Specifications," Policy Research Working Paper 2036 (Washington, D.C.: World Bank, 1998).

1 lThese income elasticities measure the percentage change in vehicle ownership or use when income changes by one percent. An elasticity greater than one means that vehicle ownership or use changes more rapidly than income.

12 Cross-country per capita income can be measured on the basis of market exchange rates or purchasing power parity (PPP) exchange rates. Income measured at market exchange rates may be more relevant for cross-country studies of motorization because vehicles are traded goods, and market exchange rate income measures the ability of an economy to purchase traded goods. Income at PPP exchange rates spans a narrower range than income defined at market exchange rates, because PPP-based income substantially exceeds market-rate based income for low-income countries. Thus income elasticities estimated using income at market exchange rates tend to be smaller than those using income at PPP exchange rates. For a discussion of purchasing power parity exchange rates, see Robert Summers and Alan Heston, "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," _Quarterly Journal of Economics, vol._ 56 (May 1991), pp. 327-368.