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

Author

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  • 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
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    Cited by:

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    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).

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    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

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