The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data
- (pp. 134-53)
Abstract
This paper uses a unique dataset of monthly new vehicle sales by detailed model from 1978 to 2007, and implements a new identification strategy to estimate the effect of the price of gasoline on individual vehicle model sales. We control for unobserved vehicle and consumer characteristics by using within model year changes in the price of gasoline and sales. We find a significant sales response, suggesting that the gasoline price increase from 2002 to 2007 explains nearly half of the decline in market share of US manufacturers. On the other hand, an increase in the gasoline tax would only modestly raise average fuel economy. (JEL H25, L11, L62, L71)Citation
Klier, Thomas, and Joshua Linn. 2010. "The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data." American Economic Journal: Economic Policy, 2 (3): 134-53. DOI: 10.1257/pol.2.3.134Additional Materials
JEL Classification
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L62 Automobiles; Other Transportation Equipment
- L71 Mining, Extraction, and Refining: Hydrocarbon Fuels
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