1. INTRODUCTION The starting point for this study is that there is no physical hindrance of driving without a license but driving illegally implies higher perceived driving costs to the drivers. Given this, the aim of this work is twofold. The first is to infer car drivers’ perceived extra costs per km and their moral costs of driving without a license. The second is to estimate the ratios between drivers’ short-term and long-term responses to license suspension. The analyses are carried out using data over: (1) car drivers’ willingness to pay for not losing their driving license for 12 months and 24 months; (2) car usage costs per km; (3) yearly driving distance per year; and (4) short-term elasticities of car usage for car drivers with respect to car usage costs.
The above elasticity ratios are compared with the results from estimates of short-run and long-run responses or car use to price changes; see Goodwin (1992), Graham and Glaister (2004) and Goodwin et al. (2004) and references therein for review. These works show that the elasticities of car travel are significantly higher in the long run than in the short run. Short-run elasticities are estimated from time series data and are generally defined as responses made within one year, although the actual time-dimension depends on the time interval of the data used. Long-run responses are estimated either from the stationary levels of dynamic models based on time series or on cross section data of car usage and prices in different geographical areas. Only with dynamic models, however, is it possible to determine how the magnitudes of these elasticities change over different time horizons. The common conclusion of the literature reviews is that elasticity of car use with respect to the fuel price is -0.1 in the short run (1-year) and -0.3 in the long run and that the complete response takes up to 6 years.
The further organization of the paper is as follows. In section 2 we present the model and the estimation procedure. Section 3 briefly describes the data used and Section 4 presents and discusses the results. Finally in section 5 we briefly summarize our work.