What Drives Gasoline Prices?

Fay Dunkerley (), Amihai Glazer and Stef Proost
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Fay Dunkerley: Center for Economic Studies, KULeuven

No 91005, Working Papers from University of California-Irvine, Department of Economics

Abstract: Gasoline taxes are the most important tax on car use. The question naturally arises as to what tax would be adopted by a government that responds to the preferences of the public. To address that issue, we begin with the standard Downsian model, where policy is determined by the median voter. This model predicts that as long as the median voter is not a car user, he wants high taxes on road use and a road capacity that maximizes net tax revenues. When he becomes a driver himself, he wants road user taxes that are lower and only increase to control congestion, as well as more road capacity. We then use panel data for 28 countries and find support for our theory. When the median voter becomes a driver, the gasoline tax drops on average by 20%.

Keywords: Gasoline taxes; Median voter theory; Political economy (search for similar items in EconPapers)
JEL-codes: H23 L98 Q48 Q52 R48 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-01
New Economics Papers: this item is included in nep-ene and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:091005

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