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Gasoline Taxes and Consumer Behavior
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Gasoline Taxes and Consumer Behavior

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  • Shanjun Li
  • Joshua Linn
  • Erich Muehlegger

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

  • Shanjun Li & Joshua Linn & Erich Muehlegger, 2012. "Gasoline Taxes and Consumer Behavior," NBER Working Papers 17891, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17891
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    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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