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The Heterogeneous Effects of Gasoline Taxes: Why Where We Live Matters

Author

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  • Spiller, Elisheba

    () (Resources for the Future)

  • Stephens, Heather M.

Abstract

Using disaggregated confidential household data, we estimate spatial variation in household-level gasoline price elasticities and the welfare effects of gasoline taxes. A novel approach allows us to model a discrete-continuous household choice of vehicle bundles, while disaggregating the choice set and including vehicle-specific fixed effects and unobserved consumer heterogeneity. The mean elasticity of demand for gasoline is -0.67, but with tremendous variation across location and income. We find that rural households have 30 percent more negative welfare impacts than urban households from gasoline taxes. Finally, we explore different policies that can help to mitigate welfare inequalities due to these taxes.

Suggested Citation

  • Spiller, Elisheba & Stephens, Heather M., 2012. "The Heterogeneous Effects of Gasoline Taxes: Why Where We Live Matters," Discussion Papers dp-12-30, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-12-30
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-12-30.pdf
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    References listed on IDEAS

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    1. Mark D. Partridge & Kamar Ali & M. Rose Olfert, 2010. "Rural-to-Urban Commuting: Three Degrees of Integration," Growth and Change, Wiley Blackwell, vol. 41(2), pages 303-335.
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    3. West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
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    5. Mark D. Partridge & Dan S. Rickman & Kamar Ali & M. Rose Olfert, 2008. "The Geographic Diversity of U.S. Nonmetropolitan Growth Dynamics: A Geographically Weighted Regression Approach," Land Economics, University of Wisconsin Press, vol. 84(2), pages 241-266.
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    Cited by:

    1. Bento, Antonio M. & Hughes, Jonathan E. & Kaffine, Daniel, 2013. "Carpooling and driver responses to fuel price changes: Evidence from traffic flows in Los Angeles," Journal of Urban Economics, Elsevier, vol. 77(C), pages 41-56.
    2. Madowitz, M. & Novan, K., 2013. "Gasoline taxes and revenue volatility: An application to California," Energy Policy, Elsevier, vol. 59(C), pages 663-673.

    More about this item

    Keywords

    gasoline taxes; welfare; elasticity; rural; commuting; transportation;

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • H0 - Public Economics - - General

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