MIT Sloan’s Knittel: Millennials Like Cars As Much As Boomers Do

Christopher Knittel of MIT Sloan is Poets&Quants’ Professor of the Week

Everybody knows that Millennials—the generation born between 1980 and 1995—don’t buy breakfast cereal or paper napkins. Many still live with their parents. They marry later and buy fewer homes than previous generations did. And they’re so happy taking Uber and Lyft they can’t be bothered to buy cars.

But when it comes to cars, that conventional wisdom is wrong: There’s no statistically significant difference in vehicle ownership between Millennials and Baby Boomers who grew up with tailfins, drag races, and the car-crazy culture of American Graffiti.

That’s the counterintuitive conclusion of a new study by Poets&Quants’ Professor of the Week, Christopher R. Knittel of the MIT Sloan School of Management, along with Elizabeth Murphy of Gensler Energy.

The researchers’ findings appeared in a working paper, “Generational Trends in Vehicle Ownership and Use: Are Millennials Any Different?,” published in April by the MIT Center for Energy and Environmental Policy Research.

They note the preconceptions of Millennials as a risk-averse “go nowhere generation” or the “cheapest generation,” but say the data don’t bear out those stereotypes.

The researchers combed the Department of Transportation’s National Household Travel Survey (NHTS) over several years, as well as data from the U.S. Census of 1990, 2000, and 2010 and the American Community Survey (ACS). All data sets contained responses at the household level, and Knittel and Murphy used that to track vehicle ownership and use, since all adults in a household typically share the expenses of vehicle ownership.

Then they identified the eldest member of each household and used his or her birth year to determine the generation of the vehicle owner. They restricted their study to Baby Boomers (born 1946 to 1964), Generation X (1965-1979), and Millennials.

When they looked at the absolute data, they found Millennials did, on average, own 0.4 fewer vehicles per household than did Baby Boomers. But when they controlled for demographics (ownership by comparable age) and economic factors, the differences narrowed substantially. “The underlying endowments are not consistent across the generations, as is to be expected, and these endowments are affecting vehicle ownership,” Knittel and his co-author write.

For example, the oldest Baby Boomers entered the workforce at the height of the postwar Golden Age of the U.S. economy, while Gen Xers came of age from the Reagan era through the Internet boom. Many Millennials, however, carry a greater student debt burden than previous generations did and, as Knittel and Murphy point out, graduated during the financial crisis and Great Recession. That may have delayed many Millennials’ entrance into the workforce and their pace of household formation.

The authors also found Millennial households are larger and slightly more likely to have children than Baby Boomers did at a similar age. Plus, they are more likely to have somewhat higher family income and live in a city, where public transportation is readily available and owning a car is not essential.

Even after factoring in all these economic and lifestyle differences, the researchers found only a 0.0116 reduction in vehicle ownership per household.

“We find that conditional on household demographics, Millennials do not differ in terms of vehicle ownership, relative to Baby Boomers,” the researchers write. “In addition, Millennial vehicle use, measured by annual vehicle miles traveled (VMT), is higher than Baby Boomers at similar stages in their lives.”

“Together, the results suggest that while Millennial vehicle ownership and use may be lower early on in life, these differences are only temporary and, in fact, lifetime vehicle use is likely to be greater.”

The bottom line: Millennials want to own their own vehicles as much as previous generations did, and when they own them, they drive them even more.

Knittel, a 46-year-old member in good standing of Gen X, is the George P. Shultz Professor of Applied Economics at MIT Sloan. His research centers on industrial organization, environmental economics, and applied econometrics, with a recent focus on energy markets.

A product of the California public university system, he got his BA at California State University Stanislaus, an MA in economics from the University of California, Davis, and his Ph.D. in economics from UC Berkeley. Before joining the MIT faculty in 2011, he taught at UC Davis and Boston University. He teaches classes in Energy Economics and Policy to undergraduate and graduate students, and Applied Economics for Managers to Executive MBA students.