Working Paper: NBER ID: w17891
Authors: Shanjun Li; Joshua Linn; Erich Muehlegger
Abstract: Gasoline taxes can be employed to correct externalities from automobile use and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we directly examine how gasoline taxes affect gasoline consumption as distinct from tax-inclusive retail gasoline prices. We find robust evidence that consumers respond more strongly to gasoline tax changes under a variety of model specifications. We discuss two potential reasons for our main findings as well as their implications.
Keywords: gasoline taxes; consumer behavior; externalities; environmental policy
JEL Codes: H3; Q4; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| gasoline prices (L90) | gasoline consumption (L91) |
| gasoline tax increases (H29) | gasoline consumption (L91) |
| gasoline tax increases (H29) | vehicle fuel economy (MPG) (L92) |
| gasoline tax increases (H29) | vehicle miles traveled (VMT) (R48) |