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The Heterogeneous Effects of Gasoline Taxes: Why Where We Live Matters

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  • Spiller, Elisheba

    (Resources for the Future)

  • Stephens, Heather M.

Abstract

Using disaggregated confidential household data, we estimate spatial variation in household-level gasoline price elasticities and the welfare effects of gasoline taxes. A novel approach allows us to model a discrete-continuous household choice of vehicle bundles, while disaggregating the choice set and including vehicle-specific fixed effects and unobserved consumer heterogeneity. The mean elasticity of demand for gasoline is -0.67, but with tremendous variation across location and income. We find that rural households have 30 percent more negative welfare impacts than urban households from gasoline taxes. Finally, we explore different policies that can help to mitigate welfare inequalities due to these taxes.

Suggested Citation

  • Spiller, Elisheba & Stephens, Heather M., 2012. "The Heterogeneous Effects of Gasoline Taxes: Why Where We Live Matters," RFF Working Paper Series dp-12-30, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-12-30
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-12-30.pdf
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    References listed on IDEAS

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    Cited by:

    1. Commander, Simon & Nikoloski, Zlatko & Vagliasindi, Maria, 2015. "Estimating the Size of External Effects of Energy Subsidies," IZA Discussion Papers 8865, Institute of Labor Economics (IZA).
    2. Demet Yilmazkuday & Hakan Yilmazkuday, 2019. "Redistributive Effects of Gasoline Prices," Networks and Spatial Economics, Springer, vol. 19(1), pages 109-124, March.
    3. Bento, Antonio M. & Hughes, Jonathan E. & Kaffine, Daniel, 2013. "Carpooling and driver responses to fuel price changes: Evidence from traffic flows in Los Angeles," Journal of Urban Economics, Elsevier, vol. 77(C), pages 41-56.
    4. Madowitz, M. & Novan, K., 2013. "Gasoline taxes and revenue volatility: An application to California," Energy Policy, Elsevier, vol. 59(C), pages 663-673.
    5. Commander,Simon John & Nikoloski,Zlatko Slobodan & Vagliasindi,Maria, 2015. "Estimating the size of external effects of energy subsidies in transport and agriculture," Policy Research Working Paper Series 7227, The World Bank.

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    More about this item

    Keywords

    gasoline taxes; welfare; elasticity; rural; commuting; transportation;
    All these keywords.

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • H0 - Public Economics - - General

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