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Gasoline Tax as a Corrective Tax: Estimates for the United States, 1970-1991

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  • Jonathan Haughton
  • Soumodip Sarkar

Abstract

Gasoline consumption creates externalities, through pollution, road congestion, accidents, and import dependence. Mat effect would a higher gasoline tax have on the related magnitudes: gasoline consumption, miles driven, and road fatalities? In this paper, separate models are estimated for gasoline use per mile, miles driven per driver, and fatalities per mile driven. We use data from 50 U.S. states and DC for 1970 through 1991, with a variety of stochastic specifications. The own-price elasticity of demand for gasoline is derived from projections with, and without, a higher gasoline tax, and is found to be between -0.12 and -0.17 in the short-run, and between -0.23 and -0.35 in the long-run. A tax of $1 per gallon would cut use by 15-20%, miles driven by 11-12%, and fatalities by 16 18% over 10 years, while raising almost $100 billion in revenue annually.

Suggested Citation

  • Jonathan Haughton & Soumodip Sarkar, 1996. "Gasoline Tax as a Corrective Tax: Estimates for the United States, 1970-1991," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 103-126.
    • Handle: RePEc:aen:journl:1996v17-02-a06
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    References listed on IDEAS

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    1. James M. Griffin, 1993. "Methodological Advances in Energy Modelling: 1970-1990," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 111-124.
    2. David L. Greene, 1992. "Vehicle Use and Fuel Economy: How Big is the "Rebound" Effect?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 117-144.
    3. David L. Greene, 1990. "CAFE OR PRICE?: An Analysis of the Effects of Federal Fuel Economy Regulations and Gasoline Price on New Car MPG, 1978-89," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 37-58.
    4. Dermot Gately, 1992. "Imperfect Price-Reversibility of U.S. Gasoline Demand: Asymmetric Responses to Price Increases and Declines," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 179-208.
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