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)
"How Do Gasoline Prices Affect Fleet Fuel Economy?"
American Economic Journal: Economic Policy,
Business Taxes and Subsidies including sales and value-added (VAT)
Production, Pricing, and Market Structure; Size Distribution of Firms
Industry Studies: Manufacturing: Other
Mining, Extraction, and Refining: Hydrocarbon Fuels