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Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market

Author

Listed:
  • Melissa Boyle

    () (Department of Economics, College of the Holy Cross)

  • Victor Matheson

    () (Department of Economics, College of the Holy Cross)

Abstract

This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids to gasoline-powered counterparts as the credit is phased out and expires, we are able to isolate the impact of the credit on the market price of hybrid vehicles. We conclude that hybrid prices increase by $0.75 on average for every additional dollar of credit. Thus, the majority of the subsidy accrues to manufacturers, potentially encouraging producers to increase the variety and availability of hybrid models on the market.

Suggested Citation

  • Melissa Boyle & Victor Matheson, 2008. "Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market," Working Papers 0811, College of the Holy Cross, Department of Economics.
  • Handle: RePEc:hcx:wpaper:0811
    as

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    File URL: http://web.holycross.edu/RePEc/hcx/HC0811-Boyle-Matheson_Hybrids.pdf
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    References listed on IDEAS

    as
    1. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
    2. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, February.
    3. Gallagher, Kelly Sims & Muehlegger, Erich, 2011. "Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 1-15, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Automobiles; tax incidence; hybrids; taxation;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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