Measuring tax incidence: a natural experiment in the hybrid vehicle market

Melissa A. Boyle and Victor A. Matheson
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Melissa A. Boyle: College of the Holy Cross
Victor A. Matheson: College of the Holy Cross

Environmental Economics and Policy Studies, 2009, vol. 10, issue 2, No 3, 107 pages

Abstract: Abstract This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids with gasoline-powered counterparts as the credit was phased out and expired, we are able to isolate the impact of the credit on the market price of hybrid vehicles. We conclude that hybrid prices increase by $0.75 on average for every additional dollar of credit. Thus, the majority of the subsidy accrues to sellers, potentially encouraging producers to increase the variety and availability of hybrid models on the market.

Keywords: Automobiles; Tax incidence; Hybrids; Taxation (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/BF03353981

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