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American Economic Journal: Economic Policy: Vol. 1 No. 2 (August 2009)

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How Do Gasoline Prices Affect Fleet Fuel Economy?

Article Citation

Li, Shanjun, Christopher Timmins, and Roger H. von Haefen. 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?" American Economic Journal: Economic Policy, 1(2): 113-37.

DOI: 10.1257/pol.1.2.113

Abstract

Exploiting a rich dataset of passenger vehicle registrations in 20 US MSAs from 1997 to 2005, we examine the effects of gasoline prices on the automotive fleet's composition. We find that high gasoline prices affect fleet fuel economy through two channels: shifting new auto purchases towards more fuel-efficient vehicles, and speeding the scrappage of older, less fuel-efficient used vehicles. Policy simulations suggest that a 10 percent increase in gasoline prices from 2005 levels will generate a 0.22 percent increase in fleet fuel economy in the short run and a 2.04 percent increase in the long run. (JEL H25, L11, L69, L71)

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Authors

Li, Shanjun (Stony Brook U, SUNY)
Timmins, Christopher (Duke U)
von Haefen, Roger H. (NC State U)

JEL Classifications

H25: Business Taxes and Subsidies including sales and value-added (VAT)
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L69: Industry Studies: Manufacturing: Other
L71: Mining, Extraction, and Refining: Hydrocarbon Fuels

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