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

Author

Listed:
  • Melissa A. Boyle

    (College of the Holy Cross)

  • Victor A. Matheson

    (College of the Holy Cross)

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.

Suggested Citation

  • Melissa A. Boyle & Victor A. Matheson, 2009. "Measuring tax incidence: a natural experiment in the hybrid vehicle market," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 10(2), pages 101-107, June.
    • Handle: RePEc:spr:envpol:v:10:y:2009:i:2:d:10.1007_bf03353981
    DOI: 10.1007/BF03353981
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    References listed on IDEAS

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    1. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
    2. Gallagher, Kelly Sims & Muehlegger, Erich, 2011. "Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 1-15, January.
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