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.
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 language | English |
|---|---|
| Pages (from-to) | 345-366 |
| Journal | Journal of Transport Economics and Policy |
| Volume | 48 |
| Issue number | 3 |
| Publication status | Published - 2014 |
