Understanding the Heterogeneous Effects of Gasoline Taxes Across Income and Location

45 Pages Posted: 26 Jul 2012 Last revised: 6 Nov 2016

See all articles by Elisheba Spiller

Elisheba Spiller

Environmental Defense Fund

Heather Stephens

Resource Economics and Management, West Virginia University

Yong Chen

Department of Applied Economics, Oregon State University

Date Written: September 23, 2016

Abstract

Using confidential household-level data, we estimate spatial and demographic variation in household-level gasoline price elasticities and gasoline tax burdens from a 60 cent federal gasoline tax increase. In order to address unobserved consumer heterogeneity, we employ a parametric adaptation of the maximum score methodology to model the household’s choice of vehicles and driving decisions, allowing for disaggregated vehicle choices, vehicle-specific fixed effects, and interactions among the multiple vehicles in each household. We estimate average price elasticities of demand for gasoline at -0.74, and find that rural and poor households bear the greater share of the tax burden. We suggest a policy that helps mitigate the tax burden inequalities across household location and income and retain government revenue.

Keywords: gasoline taxes, welfare, elasticity, rural, commuting, transportation

JEL Classification: Q0, R0, H0

Suggested Citation

Spiller, Elisheba and Stephens, Heather and Chen, Yong, Understanding the Heterogeneous Effects of Gasoline Taxes Across Income and Location (September 23, 2016). Available at SSRN: https://ssrn.com/abstract=2113594 or http://dx.doi.org/10.2139/ssrn.2113594

Elisheba Spiller (Contact Author)

Environmental Defense Fund ( email )

257 Park Avenue South
New York, NY 10010
United States

Heather Stephens

Resource Economics and Management, West Virginia University ( email )

Morgantown, WV 26506
United States

Yong Chen

Department of Applied Economics, Oregon State University ( email )

219 Ballard Extension Hall
Corvallis, OR 97331-4501
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
68
Abstract Views
511
rank
340,122
PlumX Metrics