Distributional and Efficiency Impacts of Increased US Gasoline Taxes

Abstract

We examine the impacts of increased US gasoline taxes in a model that links the markets for new, used, and scrapped vehicles and recognizes the considerable heterogeneity among households and cars. Household choice parameters derive from an estimation procedure that integrates individual choices for car ownership and miles traveled. We find that each cent-per-gallon increase in the price of gasoline reduces the equilibrium gasoline consumption by about 0.2 percent. Taking account of revenue recycling, the impact of a 25-cent gasoline tax increase on the average household is about $30 per year (2001 dollars). Distributional impacts depend importantly on how additional revenues from the tax increase are recycled. (JEL D12, H22, H25, L62, L71)

Nonparametric Estimation of a Nonseparable Demand Function under the Slutsky Inequality Restriction

“…We take vehicle ownership as given and do not investigate how changes in gasoline prices affect vehicle purchases or ownership. The results by Bento et al (2009) indicate that price changes operate mainly through vehicle miles traveled rather than fleet composition; they find that more than 95% of the reduction in gasoline consumption in response to an increase in gasoline tax is due to a reduction in vehicle miles traveled.…”

Climate Policies and Nationally Determined Contributions: Reconciling the Needed Ambition with the Political Economy

“…This finding was established as soon as the 1990s in the UK (Symons et al, 1994), then replicated to Australia (Cornwell and Creedy, 1996), and has been generalized in the 2000s, for instance with studies on the US (Bento et al, 2009;Burtraw et al, 2009;Rausch et al, 2011), Mexico (Gonzalez, 2012), Ireland (Callan et al, 2009), and China (Brenner et al, 2007;Liang and Wei, 2012). All these studies agree that recycling a fraction of carbon revenues into transfers to poor and middle class household can neutralize any regressive impact and make the reform progressive.…”

“…A literature finds that ill-designed sectoral or local policies (for instance subsidies for renewable power decided at the municipal level) may dampen the efficiency of policies with a wider scope -geographical or sectoral (Bento et al, 2009;Böhringer and Behrens, 2015;Böhringer and Rosendahl, 2010;Goulder and Schein, 2013;Hood, 2013;Weigt et al, 2013) . The main danger is when the wider-scope policy is a quantity-based policy, typically a carbon market: for instance, renewable targets for the power sector in the UE will reduce the allowance price on the EU-ETS, and emission reductions achieved thanks to renewable power will be compensated by fewer reductions in another sector covered by the ETS.…”

Measuring the price responsiveness of gasoline demand: economic shape restrictions and nonparametric demand estimation

“…In addition, we restrict our sample to households with a white respondent, two or more adults, and at least one child under 16 years of age. We take vehicle ownership as given and do not investigate how changes in prices affect vehicle purchases or how vehicle ownership varies across the income distribution (Poterba (1991), West (2004), Bento, Goulder, Henry, Jacobsen, and von Haefen (2005), Bento, Goulder, Jacobsen, and von Haefen (2009)). The results of Bento et al (2005) indicate that over 95 percent of the reduction in gasoline demand in response to price changes is due to changes in miles traveled rather than fleet composition.…”