Consumer Valuation of Fuel Costs and the Effectiveness of Tax Policy - Evidence from the European Car Market

Grigolon, Laura, Reynaert, Mathias and Verboven, Frank (2017) Consumer Valuation of Fuel Costs and the Effectiveness of Tax Policy - Evidence from the European Car Market. TSE Working Paper, n. 17-836, Toulouse

[img]
Preview
Text
Download (537kB) | Preview
Official URL: http://tse-fr.eu/pub/31958

Abstract

To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness and welfare impact of alternative tax policies' To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a long panel of European countries, and exploit variation in fuel costs by engine type. Although we find there is modest undervaluation of fuel costs, fuel taxes are still more effective in reducing fuel usage than product taxes based on fuel economy. Importantly, fuel taxes also perform better in terms of total welfare even when usage demand is held completely fixed. The reason is that fuel taxes better target the right consumers, those with a high mileage, to purchase more fuel efficient cars.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2017
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Apr 2018 13:59
Last Modified: 16 Apr 2018 13:59
OAI ID: oai:tse-fr.eu:31958
URI: http://publications.ut-capitole.fr/id/eprint/25671

Actions (login required)

View Item View Item