A Semi-parametric Approach to Estimate the Income Elasticity for a Car Fuel Price in Korea with Considering to Deal with Zero Expenditure

The analysis of the income elasticity for the car fuel expenditure is a very important research topic because of the large proportion of car fuel costs in transportation expenditure and the large amount of price fluctuation. Even if there have been many studies in other countries, few studies have been done in Korea. This paper, therefore, estimates the income elasticity for a car fuel expenditure. Furthermore, about 40 percent of all respondents reported zero expenditure on car fuel. This paper, therefore, has two major goals. The first is to estimate the income elasticity for a car fuel expenditure. The second goal is to explore a robust approach to dealing with zero expenditure on car fuel. Especially, instead of the Tobit estimator, based on the maximum likelihood (ML) estimation method, this paper applied symmetrically censored least squares (SCLS) estimation as a robust approach to dealing with zero expenditure on car fuel in Korea. According to the analysis, car fuel expenditure is very inelastic to households’ income.