Gasoline Prices, Government Support, and the Demand for Hybrid Vehicles in the U.S.

42 Pages Posted: 26 Feb 2009 Last revised: 28 Mar 2015

See all articles by Arie Beresteanu

Arie Beresteanu

University of Pittsburgh - Katz Graduate School of Business - Economics Group

Shanjun Li

Cornell University - School of Applied Economics and Management

Date Written: February 26, 2009

Abstract

We analyze the determinants in the demand for hybrid vehicles and examine government programs that aim to promote the adoption of these vehicles. We find that hybrid vehicle sales in 2006 would have been 37 percent lower had gasoline prices stayed at the 1999 levels while the effect of the federal income tax credit program is estimated at 20 percent in 2006. Our results suggest that under the income tax credit program, the cost of reducing gasoline consumption was $75 per barrel in government revenue and that of CO2 emission reduction was $177 per ton. We show that the cost-effectiveness of federal tax programs can be improved by adopting a flat rebate scheme.

Keywords: Hybrid cars, gasoline prices,demand estimation

JEL Classification: L62, Q4, Q5

Suggested Citation

Beresteanu, Arie and Li, Shanjun, Gasoline Prices, Government Support, and the Demand for Hybrid Vehicles in the U.S. (February 26, 2009). Available at SSRN: https://ssrn.com/abstract=1350070 or http://dx.doi.org/10.2139/ssrn.1350070

Arie Beresteanu (Contact Author)

University of Pittsburgh - Katz Graduate School of Business - Economics Group ( email )

United States

Shanjun Li

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

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