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Gasoline taxes or efficiency standards? A heterogeneous household demand analysis

Weiwei Liu

Energy Policy, 2015, vol. 80, issue C, 54-64

Abstract: Using detailed consumer expenditure survey data and a flexible semiparametric dynamic demand model, this paper estimates the price elasticity and fuel efficiency elasticity of gasoline demand at the household level. The goal is to assess the effectiveness of gasoline taxes and vehicle fuel efficiency standards on fuel consumption. The results reveal substantial interaction between vehicle fuel efficiency and the price elasticity of gasoline demand: the improvement of vehicle fuel efficiency leads to lower price elasticity and weakens consumers’ sensitivity to gasoline price changes. The offsetting effect also differs across households due to demographic heterogeneity. These findings imply that when gasoline taxes are in place, tightening efficiency standards will partially offset the strength of taxes on reducing fuel consumption.

Keywords: Semiparametric Estimation; Efficiency Standards; Gasoline Tax; Elasticity (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:80:y:2015:i:c:p:54-64

DOI: 10.1016/j.enpol.2015.01.029

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