the population in Norway live in rural areas, and people in rural areas are more dependent on the car and are thus less-price sensitive.
In the following we assume that the Voldmo et al. (1999) estimate of the short-term car usage elasticity refers to a time horizon of 12 months. As mentioned above, the demand curves in (1) and (2) describe the demand for car driving, that is, it does not include riding in a car as a passenger. Since the demand for driving a car and riding as a passenger are near substitutes, these demand curves are likely more elastic than the demand for car usage in general. This is because it is less serious to lose one’s driving license than to lose the possibility of travelling by private car. Hence, d = 0.12 must be regarded as a minimum value. We will, therefore, do our calculations of the value of the perceived extra costs per km of driving without a license (Q) and of the ratio between car driving elasticities (the value of λ ) for the two periods under consideration assuming different values of the short- term elasticity – d.
4. ESTIMATION RESULTS The main results, which are summarized in Table 2, are based on the estimation procedure described in section 2.2 and the exogenous values stated in section 3. The findings in Table 2 give rise to several comments.
Perceived cost per km Table 2 shows that the estimations of drivers’ perceived extra costs per km of driving without a license (Q) increase with d. This means that the more elastic one assumes that drivers short-term demand for car usage is, the higher the estimated value of Q. Table 2 reveals too that Q is higher the higher the value of P0 is. The average value of all the Q- estimations in Table 2 is 1.00 Nkr. Assuming drivers’ perceived variable usage costs per km when holding the license are between 1.00 Nkr and 1.60 Nkr (1.30 Nkr), this implies that the total variable cost per km is 2.30 Nkr when driving without a license. Consequently, losing the driving licence increases perceived variable driving costs from 1.30 Nkr to 2.30 Nkr or by 77%.