Environmental benefits from better freight transport management: freight traffic in a VAR model

Most macro empirical studies on the price elasticity in the freight transpo rt sector focus on the demand for transport. However, most of the external costs from the freight transport sector are more closely linked with the tr affic volumes. In the paper an explicit distinction between traffic and tra nsport demand is made by regarding traffic as an input in the shippers' pro duction of transport services, while transport demand is derived from firms ' production of output. An empirical analysis based on aggregate time serie s is carried out in a VAR model, where the stationary long run relationship s are estimated using the so-called 'Johansen Procedure'. The estimated pri ce elasticity with respect to traffic (-0.81) is considerably higher than t he elasticity with respect to transport (-0.47). (C) 1998 Elsevier Science Ltd. All rights reserved.