Economics at your fingertips  

Understanding the heterogeneous effects of gasoline taxes across income and location

Elisheba Spiller, Heather M. Stephens and Yong Chen

Resource and Energy Economics, 2017, vol. 50, issue C, 74-90

Abstract: Using confidential household-level data, we estimate spatial and demographic heterogeneity in household-level gasoline price elasticities and gasoline tax burdens from a 60-cent federal gasoline tax increase. In order to address unobserved consumer heterogeneity, we employ a parametric adaptation of the maximum score methodology to model the household’s choice of vehicles and driving decisions, allowing for disaggregated vehicle choices, vehicle-specific fixed effects, and interactions among the multiple vehicles in each household. We estimate average price elasticities of demand for gasoline at -0.74, with significant heterogeneity across space and demographics. We also find that rural and poor households bear the greater share of the burden from increasing taxes. Finally, we suggest a revenue recycling policy that helps mitigate the gasoline tax's resulting economic inequalities across household location and income. In addition, though a gasoline tax is an effective policy for reducing the externalities associated with driving, our policy also allows the government to retain some revenue from the tax even after the revenue recycling.

Keywords: Gasoline taxes; Vehicle choice; Driving decisions; Household location (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders

More articles in Resource and Energy Economics from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2018-02-24
Handle: RePEc:eee:resene:v:50:y:2017:i:c:p:74-90