Consumer Valuation of Fuel Costs and the Effectiveness of Tax Policy - Evidence from the European Car Market
Laura Grigolon (),
Mathias Reynaert () and
No 17-836, TSE Working Papers from Toulouse School of Economics (TSE)
To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness and welfare impact 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 costs by engine type. Although we find there is modest undervaluation of fuel costs, fuel taxes are still more effective in reducing fuel usage than product taxes based on fuel economy. Importantly, fuel taxes also perform better in terms of total welfare even when usage demand is held completely fixed. The reason is that fuel taxes better target the right consumers, those with a high mileage, to purchase more fuel efficient cars.
New Economics Papers: this item is included in nep-ene, nep-eur, nep-pbe and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
https://www.tse-fr.eu/sites/default/files/TSE/docu ... /2017/wp_tse_836.pdf Full text (application/pdf)
Working Paper: Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:31958
Access Statistics for this paper
More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().