Relationship between ethanol and gasoline: AIDS approach
Ethanol production in the United States has increased significantly due to government support, which has begun to dwindle. Ethanol now seems to compete with gasoline for vehicle fuel but because ethanol is mostly sold as a blend, gasoline and ethanol could be complementary fuel sources. The study investigates the true relationship between these fuels since it has policy implications. Results of LA/AIDS estimation show the two fuels were substitutes before the rapid expansion of ethanol production but have become complements overtime due to increasing share of ethanol in fuel consumption.
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