Gasoline Taxes and Consumer Behavior

71 Pages Posted: 2 Mar 2012 Last revised: 22 May 2022

See all articles by Shanjun Li

Shanjun Li

Cornell University - School of Applied Economics and Management

Joshua Linn

Resources for the Future

Erich Muehlegger

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2012

Abstract

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.

Suggested Citation

Li, Shanjun and Linn, Joshua and Muehlegger, Erich, Gasoline Taxes and Consumer Behavior (March 2012). NBER Working Paper No. w17891, Available at SSRN: https://ssrn.com/abstract=2014585

Shanjun Li (Contact Author)

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

248 Warren Hall
Ithaca, NY 14853
United States

Joshua Linn

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Erich Muehlegger

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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