No Need for Speed: Fuel Prices, Driving Speeds, and the Revealed Value of Time on the German Autobahn

Abstract

We estimate the relationship between fuel prices and driving speeds on the German Autobahn. The speed price elasticities are higher on sections without a speed limit (−0.047) than on those with a limit (−0.033), thus underlining the distortionary effect of speed limits on previously estimated elasticities. We also find higher elasticities when drivers are alone on the road, for high prices, and slower drivers. Based on the undistorted speed price elasticities, we estimate the short-run fuel demand elasticity and the revealed value of time (20.71 Euro/h; 83% of gross wage), hence providing valuable input for policymakers and infrastructure planning.