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

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

Author Info

Melissa Boyle () (Department of Economics, College of the Holy Cross)
Victor Matheson () (Department of Economics, College of the Holy Cross)

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Victor Matheson

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.

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Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 0811.

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Length: 12 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:hcx:wpaper:0811

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Find related papers by JEL classification:
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-09-20 (All new papers)
NEP-ENE-2008-09-20 (Energy Economics)
NEP-ENV-2008-09-20 (Environmental Economics)
NEP-PUB-2008-09-20 (Public Finance)

References listed on IDEAS
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Gallagher, Kelly Sims & Muehlegger, Erich, 2008. "Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology," Working Paper Series rwp08-009, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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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This page was last updated on 2009-11-7.

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