EconPapers    
Economics at your fingertips  
 

Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market

Frank Verboven, Laura Grigolon and Mathias Reynaert

No 10301, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness of alternative tax policies? To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a long panel of European countries, and exploit variation in fuel prices by engine type. We find there is only modest undervaluation of fuel costs. As a consequence, fuel taxes are unambiguously more effective in reducing fuel usage than product taxes based on fuel economy, because fuel taxes better target high mileage consumers.

Keywords: Effectiveness of tax policy; European car market; Fuel cost valuation (search for similar items in EconPapers)
JEL-codes: H23 L62 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-ene, nep-eur and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
https://cepr.org/publications/DP10301 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Consumer Valuation of Fuel Costs and the Effectiveness of Tax Policy - Evidence from the European Car Market (2017) Downloads
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10301

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10301

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-24
Handle: RePEc:cpr:ceprdp:10301