Suggested Citation:
Choo, Sangho, Taihyeong Lee, Patricia L. Mokhtarian (2009) Relationships between U. S. Consumer Expenditures on Communications and Transportation Using Almost Ideal Demand System Modeling:  1984- 2002. Transportation Planning and Technology 30 (5), 431 - 453

This study analyzed aggregate consumer expenditure data from the U.S. for the 19 years 1984– 2002, to determine the relationships between expenditures on transportation and those on communications. We first identified 15 categories of goods – nine for transportation, five for communications, and one for all others – and obtained prices for each category across time by using the Consumer Price Index (as is common practice). Then, we applied the linear approximate Almost Ideal Demand System method for estimating consumer demand functions, aggregating the categories to six (non-personal vehicle, personal vehicle capital, personal vehicle operation, electronic communications media, print communications media, and all others) due to the small sample size. The results indicate that transportation and communications categories have both substitution and complementarity relationships. For example, price increases for nonpersonal vehicle (non-PV) travel increase electronic media spending, indicating a substitution relationship, while electronic media price changes have a complementary effect on PV capital expenditures. The existence of effects in both directions (substitution and complementarity) is testimony to the complexity of the relationships involved, with both generation and replacement possible and happening simultaneously. In addition, expenditures in the transportation categories are generally more income-elastic and price-elastic than those in communications, indicating that communications expenditures are more essential than those for travel. The transportation categories have both substitution (PV capital and non-PV categories) and complementarity (non-PV and PV operation categories) relationships with each other, while the two communications categories have a substitution relationship.

Keywords: Consumer Expenditure Survey, consumer demand system, Almost Ideal Demand System (AIDS), telecommunications – transportation, ICT – transportation, substitution versus complementarity