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How Do Gasoline Prices Affect Fleet Fuel Economy?

  • Shanjun Li
  • Roger von Haefen
  • Christopher Timmins

Exploiting a rich data set of passenger vehicle registrations in twenty U.S. metropolitan statistical areas 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: (1) shifting new auto purchases towards more fuel-efficient vehicles, and (2) speeding the scrappage of older, less fuel-efficient used vehicles. Policy simulations based on our econometric estimates suggest that a 10% increase in gasoline prices from 2005 levels will generate a 0.22% increase in fleet fuel economy in the short run and a 2.04% increase in the long run.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14450.

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Date of creation: Oct 2008
Date of revision:
Publication status: published as 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 113-37, August.
Handle: RePEc:nbr:nberwo:14450
Note: EEE PE
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