An Econometric Analysis of Motorcycle Demand in Sarawak, Malaysia
Keywords:motorcycle ownership, vector error correction model, fuel price, gross domestic product
Motorcycles are considered a primary mode of transport in developing countries due to their affordability and lack of public transport infrastructure. Nonetheless, it is unclear whether this demand will be declining or increasing in the future due to increases in income or changes in fuel prices. Hence, this study uses vector error correction model to analyse the relationship between socio-economic variables and motorcycle ownership in Sarawak, Malaysia, using annual time series data for the 1980-2015 period. The results suggest that long-run income and price elasticity for motorcycle ownership are estimated to be 0.81 and -0.66. The study reveals that both income and fuel price are inelastic for motorcycle ownership in the long-run and that motorcycle is considered as a necessity good in Sarawak. These results provide useful insight for government to construct effective policies related to motorcycle demand.
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