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How Do Gasoline Prices Affect Fleet Fuel Economy?

Author

Listed:
  • Shanjun Li
  • Christopher Timmins
  • Roger H. von Haefen

Abstract

Exploiting a rich dataset of passenger vehicle registrations in 20 US MSAs from 1997 to 2005, we examine the effects of gasoline prices on the automotive fleet's composition. We find that high gasoline prices affect fleet fuel economy through two channels: shifting new auto purchases towards more fuel-efficient vehicles, and speeding the scrappage of older, less fuel-efficient used vehicles. Policy simulations suggest that a 10 percent increase in gasoline prices from 2005 levels will generate a 0.22 percent increase in fleet fuel economy in the short run and a 2.04 percent increase in the long run. (JEL H25, L11, L69, L71)

Suggested Citation

  • Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 113-137, August.
    • Handle: RePEc:aea:aejpol:v:1:y:2009:i:2:p:113-37
    Note: DOI: 10.1257/pol.1.2.113
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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