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How Does Fuel Taxation Impact New Car Purchases?: An Evaluation Using French Consumer-Level Data

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  • Pauline Givord
  • Céline Grislain-Letrémy
  • Helene Naegele

Abstract

This study evaluates the impact of fuel prices on new car purchases, using exhaustive individual-level data of monthly registration of new private cars in France from 2003 to 2007. Detailed information on the car holder enables us to account for heterogeneous preferences across purchasers. We identify demand parameters through the large oil price fluctuations of this period. We find that the sensitivity of short-term demand with respect to fuel prices is generally low. Using these estimates, we assess the impact of a policy equalizing diesel and gasoline taxes. Such a policy would reduce the share of diesel in new cars purchases from 69% to 66% in the short-run, without substantially changing the average fuel consumption or CO2 emission levels of new cars. Alternatively, a carbon tax would slightly decrease the CO2 emission levels of new cars in the short-run (by 0.1%) without any significant impact on the share of diesel cars purchased.

Suggested Citation

  • Pauline Givord & Céline Grislain-Letrémy & Helene Naegele, 2014. "How Does Fuel Taxation Impact New Car Purchases?: An Evaluation Using French Consumer-Level Data," Discussion Papers of DIW Berlin 1428, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1428
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    References listed on IDEAS

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    2. Claudia N. Berg & Uwe Deichmann & Yishen Liu & Harris Selod, 2017. "Transport Policies and Development," Journal of Development Studies, Taylor & Francis Journals, vol. 53(4), pages 465-480, April.

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    More about this item

    Keywords

    Fuel prices; automobiles; carbon dioxide emissions; environmental tax;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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