How Do Gasoline Prices Affect Fleet Fuel Economy?
Cornell University - School of Applied Economics and Management
Roger H. von Haefen
North Carolina State University - Department of Agricultural & Resource Economics
Duke University - Department of Economics
NBER Working Paper No. w14450
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.
Number of Pages in PDF File: 45
Date posted: November 3, 2008
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