The Relationship Between VMT and Economic Activity

Abstract

Vehicle miles traveled (VMT) in the U.S. have exhibited an upward trend over time similar to that observed for gross domestic product (GDP) and personal income (PI). While conventional wisdom suggests that economic growth leads to more driving and thus higher VMT, it is theoretically possible that the causation could also be the other way around. If causation is from VMT to GDP, then legislation such as the Federal Surface Transportation Policy and Planning Act of 2009’s directive to annually reduce national per capita VMT could potentially have an adverse impact on overall economic activity. This study uses times series techniques to empirically test for Granger causality between VMT and various measures of national economic activity over time. In most circumstances the causal relationship is found to be from economic activity to VMT, confirming conventional wisdom and suggesting that exogenous shocks to VMT would not negatively impact national GDP. The relationship between national VMT and GDP is found to be dependent on the stage of the business cycle, in particular GDP leads VMT in economic upturns or normal times, but VMT tends to lead GDP recessions. For the 98 urban areas included in this study no significant causal relationship was found between VMT and economic activity in either direction. A derived demand analysis was conducted to explore the relationship between VMT and economic activity on a more micro level to determine where potential adverse impacts from VMT reduction policies might arise and how policy could be formulated to mitigate those impacts. Factors found to significantly contribute to the demand for VMT in urban areas, included lane miles, personal income, population density, fuel cost, transit use, and the percent of employment in the construction or wholesale sectors. Both transit use and population density were found to be negatively related to VMTPC and per capita VMT was found to be higher the more western and the larger the population size of an urban area.