IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/14450.html

How Do Gasoline Prices Affect Fleet Fuel Economy?

Author

Listed:
  • Shanjun Li
  • Roger von Haefen
  • Christopher Timmins

Abstract

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.

Suggested Citation

  • Shanjun Li & Roger von Haefen & Christopher Timmins, 2008. "How Do Gasoline Prices Affect Fleet Fuel Economy?," NBER Working Papers 14450, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14450
    Note: EEE PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w14450.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    2. repec:aen:journl:2008v29-01-a06 is not listed on IDEAS
    3. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    4. repec:aen:journl:2007v28-01-a02 is not listed on IDEAS
    5. William C. Wheaton, 1982. "The Long-Run Structure of Transportation and Gasoline Demand," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 439-454, Autumn.
    6. Sarah E. West & Roberton C. Williams III, 2005. "The Cost of Reducing Gasoline Consumption," American Economic Review, American Economic Association, vol. 95(2), pages 294-299, May.
    7. Jean Agras & Duane Chapman, 1999. "The Kyoto Protocol, Cafe Standards, And Gasoline Taxes," Contemporary Economic Policy, Western Economic Association International, vol. 17(3), pages 296-308, July.
    8. Dahl, Carol A, 1979. "Consumer Adjustment to a Gasoline Tax," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 427-432, August.
    9. Charles F. Manski & Ephraim Goldin, 1983. "An Econometric Analysis of Automobile Scrappage," Transportation Science, INFORMS, vol. 17(4), pages 365-375, November.
    10. Pinelopi Koujianou Goldberg, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 1-33, March.
    11. Alan Greenspan & Darrel Cohen, 1999. "Motor Vehicle Stocks, Scrappage, And Sales," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 369-383, August.
    12. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    13. Brown, Jennifer & Hastings, Justine & Mansur, Erin T. & Villas-Boas, Sofia B., 2008. "Reformulating competition Gasoline content regulation and wholesale gasoline prices," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 1-19, January.
    14. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    15. Thomas H. Klier & Joshua Linn, 2009. "The price of gasoline and the demand for fuel economy: evidence from monthly new vehicles sales data," Working Paper Series WP-09-15, Federal Reserve Bank of Chicago.
    16. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    17. Anna Alberini & Winston Harrington & Virginia McConnell, 1995. "Determinants of Participation in Accelerated Vehicle-Retirement Programs," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 93-112, Spring.
    18. Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 17-37, February.
    19. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    20. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    21. Lucas W. Davis & Matthew E. Kahn, 2008. "International Trade in Used Durable Goods: The Environmental Consequences of NAFTA," NBER Working Papers 14565, National Bureau of Economic Research, Inc.
    22. Kenneth A. Small & Kurt Van Dender, 2006. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," Working Papers 050603, University of California-Irvine, Department of Economics.
    23. repec:aen:journl:1996v17-02-a06 is not listed on IDEAS
    24. Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
    25. James Berkovec, 1985. "New Car Sales and Used Car Stocks: A Model of the Automobile Market," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 195-214, Summer.
    26. Christopher Knittel & Daniel Sperling, 2006. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," Working Papers 97, University of California, Davis, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lawrence Goulder, 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Discussion Papers 07-009, Stanford Institute for Economic Policy Research.
    2. Liu, Yizao, 2010. "Gasoline Prices, Fuel Economy Efficiency And Automobile Replacement Dynamics," Working Paper series 148290, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    3. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    4. Banzhaf, H. Spencer & Kasim, M. Taha, 2019. "Fuel consumption and gasoline prices: The role of assortative matching between households and automobiles," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 1-25.
    5. Junji Xiao & Xiaolan Zhou & Wei‐Min Hu, 2017. "Welfare Analysis Of The Vehicle Quota System In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 617-650, May.
    6. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    7. Bruce W Hamilton & Molly Macauley, 1996. "Competition and Car Longevity," Economics Working Paper Archive 361, The Johns Hopkins University,Department of Economics.
    8. Naoki Wakamori, 2011. "Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market," Staff Working Papers 11-27, Bank of Canada.
    9. Yizao Liu, 2010. "Gasoline Prices, Fuel Economy Efficiency And Automobile Replacement Dynamics," Working Papers 02, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    10. Durrmeyer, Isis & Samano, Mario, 2016. "To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates?," TSE Working Papers 16-732, Toulouse School of Economics (TSE), revised May 2017.
    11. Li, Shanjun & Wang, Binglin & Zhou, Hui, 2024. "Decarbonizing passenger transportation in developing countries: Lessons and perspectives1," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    12. Doremus, Jacqueline & Helfand, Gloria & Liu, Changzheng & Donahue, Marie & Kahan, Ari & Shelby, Michael, 2019. "Simpler is better: Predicting consumer vehicle purchases in the short run," Energy Policy, Elsevier, vol. 129(C), pages 1404-1415.
    13. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
    14. Tscharaktschiew, Stefan, 2014. "Shedding light on the appropriateness of the (high) gasoline tax level in Germany," Economics of Transportation, Elsevier, vol. 3(3), pages 189-210.
    15. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    16. Jiménez, Juan Luis & Perdiguero, Jordi & García, Carmen, 2016. "Evaluation of subsidies programs to sell green cars: Impact on prices, quantities and efficiency," Transport Policy, Elsevier, vol. 47(C), pages 105-118.
    17. Zhou, Fan & Yang, Ziying & Wu, Di & Zheng, Zuduo, 2024. "Shifting towards luxury cars: The price and environmental effects of Beijing’s vehicle lottery system and an alternative policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 181(C).
    18. Bergeaud, Antonin & Raimbault, Juste, 2020. "An empirical analysis of the spatial variability of fuel prices in the United States," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 131-143.
    19. Xiao, Junji & Ju, Heng, 2011. "The impacts of air-pollution motivated automobile consumption tax adjustments of China," MPRA Paper 27743, University Library of Munich, Germany.
    20. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14450. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.