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Fuel consumption and gasoline prices: The role of assortative matching between households and automobiles

Spencer Banzhaf () and M. Taha Kasim

Journal of Environmental Economics and Management, 2019, vol. 95, issue C, 1-25

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 policies change 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 $0.50 increase in the gas tax would reduce US gas consumption by 0.8% through the matching effect alone, bringing annual environmental benefits of about $1.7 billion.

Keywords: Energy; Gasoline demand; Automobiles (search for similar items in EconPapers)
Date: 2019
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Working Paper: Fuel Consumption and Gasoline Prices: The Role of Assortative Matching between Households and Automobiles (2016) Downloads
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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