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Car User Taxes, Quality Characteristics, and Fuel Efficiency Household Behaviour and Market Adjustment

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  • Bruno De Borger
  • Jan Rouwendal

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. © 2013 LSE and the University of Bath

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  • Bruno De Borger & Jan Rouwendal, 2014. "Car User Taxes, Quality Characteristics, and Fuel Efficiency Household Behaviour and Market Adjustment," Journal of Transport Economics and Policy, University of Bath, vol. 48(3), pages 345-366, September.
    • Handle: RePEc:tpe:jtecpo:v:48:y:2014:i:3:p:345-366
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    2. Mónica Meireles & Margarita Robaina & Daniel Magueta, 2021. "The Effectiveness of Environmental Taxes in Reducing CO 2 Emissions in Passenger Vehicles: The Case of Mediterranean Countries," IJERPH, MDPI, vol. 18(10), pages 1-13, May.
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    6. Tovar Reaños, Miguel A., 2020. "Initial incidence of carbon taxes and environmental liability. A vehicle ownership approach," Energy Policy, Elsevier, vol. 143(C).

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    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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