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Vehicle ownership and usage charges

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  • Muthukrishnan, Subhashini

Abstract

We present a simple model to study the welfare effects of a shift from ownership to usage taxes for cars. We consider a model in which a single representative consumer derives utility from consuming two goods--consumption of motor vehicle kilometers, and an aggregate consumption good treated as numeraire. We characterize the optimal consumption of car kilometers by a representative car user and find that a shift from ownership towards usage taxes is not necessarily welfare-improving: while a revenue-neutral shift makes the representative car user worse off; a utility-neutral shift leads to a significant loss of revenue to the government. An empirical analysis based on Singapore data is also consistent with our theoretical results.

Suggested Citation

  • Muthukrishnan, Subhashini, 2010. "Vehicle ownership and usage charges," Transport Policy, Elsevier, vol. 17(6), pages 398-408, November.
    • Handle: RePEc:eee:trapol:v:17:y:2010:i:6:p:398-408
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    References listed on IDEAS

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    Cited by:

    1. Bénédicte Meurisse & Maxime Le Roy, 2014. "Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications," Working Papers hal-04141349, HAL.
    2. Bénédicte Meurisse & Maxime Le Roy, 2014. "Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications," Working Papers 1406, Chaire Economie du climat.
    3. Chu, Singfat, 2012. "Allocation flexibility and price efficiency within Singapore’s Vehicle Quota System," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(10), pages 1541-1550.
    4. Fu, Miao & Andrew Kelly, J., 2012. "Carbon related taxation policies for road transport: Efficacy of ownership and usage taxes, and the role of public transport and motorist cost perception on policy outcomes," Transport Policy, Elsevier, vol. 22(C), pages 57-69.

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