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Product Quality and Environmental Taxation


  • Gareth D. Myles
  • Ayse Uyduranoglu


In developed countries, car use is one of the most significant contributors to air pollution. It is also a notable fact that larger, heavier cars consume more fuel and hence contribute more to pollution. This observation has led to policy proposals to structure taxation to encourage the use of smaller, lighter cars. A model of vertical product differentiation shows that there are, however, reasons why the standard policy response may be flawed and that it may even be optimal to subsidise large cars at the expense of small ones. © The London School of Economics and the University of Bath 2002

Suggested Citation

  • Gareth D. Myles & Ayse Uyduranoglu, 2002. "Product Quality and Environmental Taxation," Journal of Transport Economics and Policy, University of Bath, vol. 36(2), pages 233-266, May.
  • Handle: RePEc:tpe:jtecpo:v:36:y:2002:i:2:p:233-266

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics


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