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Gasoline Taxes and Consumer Behavior

  • Shanjun Li
  • Joshua Linn
  • Erich Muehlegger

Gasoline taxes can be employed to correct externalities from automobile use and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we directly examine how gasoline taxes affect gasoline consumption as distinct from tax-inclusive retail gasoline prices. We find robust evidence that consumers respond more strongly to gasoline tax changes under a variety of model specifications. We discuss two potential reasons for our main findings as well as their implications.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17891.

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Date of creation: Mar 2012
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Publication status: published as Gasoline Taxes and Consumer Behavior (with Shanjun Li and Erich Muehlegger). American Economic Journal: Economic Policy, forthcoming.
Handle: RePEc:nbr:nberwo:17891
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