The Endogeneity of OECD Gasoline Taxes: Evidence from Pair-Wise, Heterogeneous Panel Long-Run Causality Tests

Transportation Research A: Policy and Practice, Vol. 73, pp. 31-38, 2015, DOI: 10.1016/j.tra.2014.12.009

21 Pages Posted: 31 Jan 2015

See all articles by Brant Liddle

Brant Liddle

Energy Studies Institute, NUS

Sidney Lung

Victoria University - School of Economics and Finance

Date Written: January 29, 2015

Abstract

Despite the current interest in using fuel taxes as an instrument for climate policy, there has been little study of current automotive fuel tax regimes. We expand on two earlier cross-sectional studies on why fuel taxes differ across countries by using OECD panel data and employing heterogeneous panel cointegration and long-run panel Granger-causality techniques. We confirm some of those earlier studies’ conclusions. Further, we find that governments that rely on consumption-based taxes for revenues will have higher gasoline tax rates (than governments that rely on income and wealth/property-based taxes). But more significantly, we determine that higher gasoline demand among consumers “causes” democratic governments to set lower gasoline taxes — a finding with important implications for today’s climate/energy policy debate.

Keywords: determinants of OECD gasoline taxes, gasoline tax/price endogeneity, long-run panel Granger-causality, cross-sectional dependence, panel heterogeneity

JEL Classification: C23, H20, R40, R48

Suggested Citation

Liddle, Brant and Lung, Sidney, The Endogeneity of OECD Gasoline Taxes: Evidence from Pair-Wise, Heterogeneous Panel Long-Run Causality Tests (January 29, 2015). Transportation Research A: Policy and Practice, Vol. 73, pp. 31-38, 2015, DOI: 10.1016/j.tra.2014.12.009 , Available at SSRN: https://ssrn.com/abstract=2557780

Brant Liddle (Contact Author)

Energy Studies Institute, NUS ( email )

29 Heng Mui Keng Terrace
Singapore
Malaysia

Sidney Lung

Victoria University - School of Economics and Finance ( email )

Melbourne
Australia

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