Car User Taxes, Quality Characteristics, and Fuel Efficiency

B. de Borger, J. Rouwendal

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We study the impact of car user taxes on vehicle quality and demand for kilometres. First, holding car prices fixed, we find that a higher fuel tax leads households to choose cars of better fuel efficiency, provided that the demand for car use is inelastic. Surprisingly, a higher kilometre tax reduces the demand for fuel efficiency. Next, we study how car prices react to the tax changes. Fuel taxes make
owning very fuel-efficient cars more expensive, while reducing prices of cars of low fuel efficiency. Both fuel taxes and kilometre charges imply lower prices for large and powerful cars.
Original languageEnglish
Pages (from-to)345-366
JournalJournal of Transport Economics and Policy
Volume48
Issue number3
Publication statusPublished - 2014

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