Direct and Indirect Effects of Economic Development on Motorcycle to Car Ownership Ratio

Abstract

Previous studies had assessed the direct effect of income per capita and income inequality on the growth of motorcycle to car ownership ratio (MTC). This study quantified the overall growth pattern of MTC by also including the indirect effect measured as the influence of income inequality on MTC as the level of income per capita changes. The overall effect of income per capita on MTC was taken as the summation of both the direct and indirect effects. Two fixed-effects panel linear regression models were developed to estimate these relationships. The overall MTC growth pattern was found to closely follow the Kuznets inverse-U curve of the direct effect with the same income per capita turning point but with greater differences at the lower and higher ends of income level. These findings showed that MTC increases and decreases at higher rates compared to earlier findings after considering the effect of income inequality.