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Distributional and Efficiency Impacts of Increased US Gasoline Taxes

  • Antonio M. Bento
  • Lawrence H. Goulder
  • Mark R. Jacobsen
  • Roger H. von Haefen

We examine the impacts of increased US gasoline taxes in a model that links the markets for new, used, and scrapped vehicles and recognizes the considerable heterogeneity among households and cars. Household choice parameters derive from an estimation procedure that integrates individual choices for car ownership and miles traveled. We find that each cent-per-gallon increase in the price of gasoline reduces the equilibrium gasoline consumption by about 0.2 percent. Taking account of revenue recycling, the impact of a 25-cent gasoline tax increase on the average household is about $30 per year (2001 dollars). Distributional impacts depend importantly on how additional revenues from the tax increase are recycled. (JEL D12, H22, H25, L62, L71)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 3 (June)
Pages: 667-99

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:3:p:667-99
Note: DOI: 10.1257/aer.99.3.667
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  1. Ye Feng & Don Fullerton & Li Gan, 2013. "Vehicle choices, miles driven, and pollution policies," Journal of Regulatory Economics, Springer, vol. 44(1), pages 4-29, August.
  2. Hausman, Jerry A & Newey, Whitney K, 1995. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Econometrica, Econometric Society, vol. 63(6), pages 1445-76, November.
  3. Sarah E. West & Roberton C. Williams III, 2005. "The Cost of Reducing Gasoline Consumption," American Economic Review, American Economic Association, vol. 95(2), pages 294-299, May.
  4. Roger H. von Haefen & D. Matthew Massey & Wiktor L. Adamowicz, 2005. "Serial Nonparticipation in Repeated Discrete Choice Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1061-1076.
  5. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  6. Lawrence H. Goulder & Roberton C. Williams III, 2003. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 898-927, August.
  7. Poterba, J.M., 1989. "Lifetime Incidence And The Distributional Burden Of Excise Taxes," Working papers 510, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Sarah E. West & Roberton C. Williams III, 2002. "Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes," NBER Working Papers 9152, National Bureau of Economic Research, Inc.
  9. Mannering, Fred L., 1986. "A note on endogenous variables in household vehicle utilization equations," Transportation Research Part B: Methodological, Elsevier, vol. 20(1), pages 1-6, February.
  10. West, Sarah E. & Williams III, Roberton C., 2007. "Optimal taxation and cross-price effects on labor supply: Estimates of the optimal gas tax," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 593-617, April.
  11. Fred Mannering & Clifford Winston, 1985. "A Dynamic Empirical Analysis of Household Vehicle Ownership and Utilization," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 215-236, Summer.
  12. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
  13. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
  14. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-30, December.
  15. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
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