Gasoline Taxes and Consumer Behavior
71 Pages Posted: 2 Mar 2012 Last revised: 22 May 2022
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Gasoline Taxes and Consumer Behavior
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.
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