Working Paper: NBER ID: w22983
Authors: H. Spencer Banzhaf; Taha Kasim
Abstract: Analyses of policies to reduce gasoline consumption have focused on two effects, a compositional effect on the fuel economy of the automotive fleet and a utilization effect on how much people drive. However, the literature has missed a third effect: a matching effect, in which the policy changes how high-utilization households are matched to fuel-efficient vehicles in equilibrium. We show that higher gas prices should lead to stronger assortative matching. Empirical estimates using US micro-level data are consistent with this hypothesis. We find a $1 gas tax would reduce US gas consumption by 1.5% through the matching effect alone.
Keywords: Fuel Consumption; Gasoline Prices; Assortative Matching; Households; Automobiles
JEL Codes: Q4; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher gasoline prices (R48) | stronger assortative matching between high-utilization households and fuel-efficient vehicles (R22) |
| stronger assortative matching between high-utilization households and fuel-efficient vehicles (R22) | allocation of fuel-efficient cars to high-utilization households (R22) |
| higher gasoline prices (R48) | allocation of less efficient vehicles to low-utilization households (R22) |
| allocation of fuel-efficient cars to high-utilization households (R22) | reduction in overall gasoline consumption (Q41) |
| higher gasoline prices (R48) | increase in vehicle fuel economy for high-utilization households (R29) |