IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/22983.html
   My bibliography  Save this paper

Fuel Consumption and Gasoline Prices: The Role of Assortative Matching between Households and Automobiles

Author

Listed:
  • H. Spencer Banzhaf
  • Taha Kasim

Abstract

Analyses of policies to reduce gasoline consumption have focused on two effects, a compositional effect on the fuel economy of the automotive fleet and a utilization effect on how much people drive. However, the literature has missed a third effect: a matching effect, in which the policy changes how high-utilization households are matched to fuel-efficient vehicles in equilibrium. We show that higher gas prices should lead to stronger assortative matching. Empirical estimates using US micro-level data are consistent with this hypothesis. We find a $1 gas tax would reduce US gas consumption by 1.5% through the matching effect alone.

Suggested Citation

  • H. Spencer Banzhaf & Taha Kasim, 2016. "Fuel Consumption and Gasoline Prices: The Role of Assortative Matching between Households and Automobiles," NBER Working Papers 22983, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22983
    Note: EEE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w22983.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John Coglianese & Lucas W. Davis & Lutz Kilian & James H. Stock, 2017. "Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(1), pages 1-15, January.
    2. Joshua Linn, 2016. "The Rebound Effect for Passenger Vehicles," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
    4. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    5. Kenneth Gillingham & Matthew J. Kotchen & David S. Rapson & Gernot Wagner, 2013. "The rebound effect is overplayed," Nature, Nature, vol. 493(7433), pages 475-476, January.
    6. Janet Currie & Joshua Graff Zivin & Jamie Mullins & Matthew Neidell, 2014. "What Do We Know About Short- and Long-Term Effects of Early-Life Exposure to Pollution?," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 217-247, October.
    7. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    8. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    9. Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 113-137, August.
    10. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    11. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    12. Soren T. Anderson & Ryan Kellogg & James M. Sallee & Richard T. Curtin, 2011. "Forecasting Gasoline Prices Using Consumer Surveys," American Economic Review, American Economic Association, vol. 101(3), pages 110-114, May.
    13. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    14. Mark R. Jacobsen, 2013. "Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 148-187, May.
    15. Antonio M. Bento & Maureen L. Cropper & Ahmed Mushfiq Mobarak & Katja Vinha, 2005. "The Effects of Urban Spatial Structure on Travel Demand in the United States," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 466-478, August.
    16. Thomas Klier & Joshua Linn, 2010. "The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 134-153, August.
    17. Davis, Michael C & Hamilton, James D, 2004. "Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 17-37, February.
    18. Sallee, James M. & West, Sarah E. & Fan, Wei, 2016. "Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations," Journal of Public Economics, Elsevier, vol. 135(C), pages 61-73.
    19. Ye Feng & Don Fullerton & Li Gan, 2013. "Vehicle choices, miles driven, and pollution policies," Journal of Regulatory Economics, Springer, vol. 44(1), pages 4-29, August.
    20. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-362, March.
    21. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, vol. 103(1), pages 220-256, February.
    22. Puller, Steven L. & Greening, Lorna A., 1999. "Household adjustment to gasoline price change: an analysis using 9 years of US survey data," Energy Economics, Elsevier, vol. 21(1), pages 37-52, February.
    23. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    24. Pinelopi Koujianou Goldberg, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 1-33, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lu, Tingmingke, 2023. "Response of new car buyers to alternative energy policies: The role of vehicle use heterogeneity," Economic Modelling, Elsevier, vol. 120(C).
    2. Arik Levinson & Lutz Sager, 2023. "Who Values Future Energy Savings? Evidence from American Drivers," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(3), pages 717-751.
    3. Cui, Yuepeng & Xu, Hao & Zou, Fumin & Chen, Zhihui & Gong, Kuangmin, 2021. "Optimization based method to develop representative driving cycle for real-world fuel consumption estimation," Energy, Elsevier, vol. 235(C).
    4. Greene, David L. & Sims, Charles B. & Muratori, Matteo, 2020. "Two trillion gallons: Fuel savings from fuel economy improvements to US light-duty vehicles, 1975–2018," Energy Policy, Elsevier, vol. 142(C).
    5. Matsushima, Hiroshi & Khanna, Madhu, 2022. "Estimating Medium-run Direct Rebound Effects of the Footprint-based CAFE Standard," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322420, Agricultural and Applied Economics Association.
    6. Strittmatter, Anthony & Lechner, Michael, 2020. "Sorting in the used-car market after the Volkswagen emission scandal," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    7. Xu, Lei & Chen, Jingrui & Qu, Fang & Wang, Jue & Lu, Yi, 2022. "Queuing to refuel before price rise in China: How do gasoline price changes affect consumer responses and behaviours?," Energy, Elsevier, vol. 253(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    2. Joshua Linn, 2016. "The Rebound Effect for Passenger Vehicles," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Allcott, Hunt & Mullainathan, Sendhil & Taubinsky, Dmitry, 2014. "Energy policy with externalities and internalities," Journal of Public Economics, Elsevier, vol. 112(C), pages 72-88.
    4. Givord, Pauline & Grislain-Letrémy, Céline & Naegele, Helene, 2018. "How do fuel taxes impact new car purchases? An evaluation using French consumer-level data," Energy Economics, Elsevier, vol. 74(C), pages 76-96.
    5. De Borger, Bruno & Mulalic, Ismir & Rouwendal, Jan, 2016. "Substitution between cars within the household," Transportation Research Part A: Policy and Practice, Elsevier, vol. 85(C), pages 135-156.
    6. Verboven, Frank & Grigolon, Laura & Reynaert, Mathias, 2014. "Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market," CEPR Discussion Papers 10301, C.E.P.R. Discussion Papers.
    7. Knittel, Christopher R. & Tanaka, Shinsuke, 2021. "Fuel economy and the price of gasoline: Evidence from fueling-level micro data," Journal of Public Economics, Elsevier, vol. 202(C).
    8. Lawrence Goulder, 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Discussion Papers 07-009, Stanford Institute for Economic Policy Research.
    9. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    10. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
    11. Liu, Yizao, 2010. "Gasoline Prices, Fuel Economy Efficiency And Automobile Replacement Dynamics," Working Paper series 148290, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    12. Nicholas Rivers & Brandon Schaufele, 2017. "New vehicle feebates," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(1), pages 201-232, February.
    13. Greene, David L. & Sims, Charles B. & Muratori, Matteo, 2020. "Two trillion gallons: Fuel savings from fuel economy improvements to US light-duty vehicles, 1975–2018," Energy Policy, Elsevier, vol. 142(C).
    14. Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 113-137, August.
    15. De Borger, Bruno & Mulalic, Ismir & Rouwendal, Jan, 2016. "Measuring the rebound effect with micro data: A first difference approach," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 1-17.
    16. Konishi, Yoshifumi & Kuroda, Sho, 2023. "Why is Japan’s carbon emissions from road transportation declining?," Japan and the World Economy, Elsevier, vol. 66(C).
    17. Yujie Lin & Joshua Linn, 2023. "Environmental Regulation and Product Attributes: The Case of European Passenger Vehicle Greenhouse Gas Emissions Standards," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 1-32.
    18. Donna, Javier D., 2018. "Measuring Long-Run Price Elasticities in Urban Travel Demand," MPRA Paper 90059, University Library of Munich, Germany.
    19. Gillingham, Kenneth & Munk-Nielsen, Anders, 2019. "A tale of two tails: Commuting and the fuel price response in driving," Journal of Urban Economics, Elsevier, vol. 109(C), pages 27-40.
    20. Marrouch, Walid & Mourad, Jana, 2019. "Effect of gasoline prices on car fuel efficiency: Evidence from Lebanon," Energy Policy, Elsevier, vol. 135(C).

    More about this item

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:22983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.