On the effectiveness of pricing urban car usage

Population demography, income, and the price of car usage are probably the most important factors that determine car usage. Using a panel of European countries, this paper shows that national income and demography are strong drivers. Saturating car ownership and an ageing population hardly diminish their significance. Relative to these factors, pricing is a rather weak driver, so that the impact of pricing quickly cancels out against prospective population and income growth. In relation to income growth, prices need to increase at least three times faster in order to maintain their effectiveness. Its relatively low elasticity makes pricing a good instrument to raise money for more effective (physical and soft) measures.