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Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market

Melissa Boyle and Victor Matheson ()

No 811, Working Papers from College of the Holy Cross, Department of Economics

Abstract: This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids to gasoline-powered counterparts as the credit is phased out and expires, 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 manufacturers, 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)
JEL-codes: H22 L62 Q48 Q53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-pub
Date: 2008-09
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Published in Environmental Economics and Policy Studies, Vol. 10:2-4, Fall 2009, 101-107.

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