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Vehicle ownership and usage charges

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  • Muthukrishnan, Subhashini

Abstract

We present a simple model to study the welfare effects of a shift from ownership to usage taxes for cars. We consider a model in which a single representative consumer derives utility from consuming two goods--consumption of motor vehicle kilometers, and an aggregate consumption good treated as numeraire. We characterize the optimal consumption of car kilometers by a representative car user and find that a shift from ownership towards usage taxes is not necessarily welfare-improving: while a revenue-neutral shift makes the representative car user worse off; a utility-neutral shift leads to a significant loss of revenue to the government. An empirical analysis based on Singapore data is also consistent with our theoretical results.

Suggested Citation

  • Muthukrishnan, Subhashini, 2010. "Vehicle ownership and usage charges," Transport Policy, Elsevier, vol. 17(6), pages 398-408, November.
    • Handle: RePEc:eee:trapol:v:17:y:2010:i:6:p:398-408
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    References listed on IDEAS

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    Cited by:

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    3. Bénédicte Meurisse & Maxime Le Roy, 2014. "Towards a clean vehicle fleet: from households’ valuation of fuel efficiency to policy implications," Working Papers hal-04141349, HAL.
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