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

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Author Info

  • Melissa Boyle

    ()
    (Department of Economics, College of the Holy Cross)

  • Victor Matheson

    ()
    (Department of Economics, 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 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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File URL: http://college.holycross.edu/RePEc/hcx/Boyle-Matheson_Hybrids.pdf
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Bibliographic Info

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:
Publication status: Published in Environmental Economics and Policy Studies, Vol. 10:2-4, Fall 2009, 101-107.
Handle: RePEc:hcx:wpaper:0811

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Web page: http://www.holycross.edu/departments/economics/website/
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Keywords: Automobiles; tax incidence; hybrids; taxation;

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  1. 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.
  2. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, 02.
  3. 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.
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