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Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology

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Author Info
Gallagher, Kelly Sims (Harvard U)
Muehlegger, Erich
Abstract

Federal, state and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits and non-tax incentives and find that the type of tax incentive offered is as important as the value of the tax incentive. Conditional on value, we find that sales tax waivers are associated a seven-fold greater increase in hybrid sales than income tax credits. In addition, we estimate the extent to which consumer adoption of hybrid-electric vehicles (HEV) in the United States from 2000-2006 can be attributed to government incentives, changing gasoline prices, or consumer preferences for environmental quality or energy security. After controlling for model specific state and time trends, we find that rising gasoline prices are associated with higher hybrid sales, although the effect operates entirely through sales of the hybrid models with the highest fuel economy. In total, we find that tax incentives, rising gasoline prices and social preferences are associated with 6, 27 and 36 percent of high economy hybrid sales from 2000-2006.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp08-009.

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Date of creation: Feb 2008
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Handle: RePEc:ecl:harjfk:rwp08-009

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  1. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April. [Downloadable!] (restricted)
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  2. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September. [Downloadable!]
  3. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2006. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," NBER Working Papers 12530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April. [Downloadable!] (restricted)
  6. McManus, Walter, 2006. "Can proactive fuel economy strategies help automakers mitigate fuel price risk?," MPRA Paper 3460, University Library of Munich, Germany. [Downloadable!]
  7. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February. [Downloadable!] (restricted)
  8. Hausman, Jerry A & Joskow, Paul L, 1982. "Evaluating the Costs and Benefits of Appliance Efficiency Standards," American Economic Review, American Economic Association, vol. 72(2), pages 220-25, May. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
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  1. Melissa Boyle & Victor Matheson, 2008. "Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market," Working Papers 0811, College of the Holy Cross, Department of Economics. [Downloadable!]
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