Induced road traffic in Spanish regions: A dynamic panel data model

Distinguishing between traffic generated exclusively from the expansion of the road network (induced demand) and that resulting from other demand factors is of crucial importance to properly designed transport policies. This paper analyzes and quantifies the induced demand for road transport for Spain’s main regions from 1998 to 2006, years that saw mobility in Spain attain its highest growth rate. The lack of research in this area involving Spain and the key role played by the sector, given its high level of energy consumption and the negative externalities associated with it (accidents, noise, traffic congestion, emissions, etc.), endow greater relevance to this type of research. Based on a Dynamic Panel Data (DPD) reduced-form model, we apply alternative approaches (fixed and random effects and GMM-based methods) for measuring the induced demand. The results obtained provide evidence for the existence of an induced demand for transport in Spain, though said results vary depending on the estimating method employed.

► This paper tests the hypothesis of induced transport demand for Spanish regions.
► Using dynamic panel data model, results are sensitive to the estimating method utilized.
► Using an appropriate GMM-based method, strong proof is found in favor of induced demand.
► The estimated short-term elasticity is 0.12, while the long-run one is almost 0.25.
► Fuel price policies seem to be very effective to reduce road traffic in Spain.