Gasoline taxes can be employed to correct externalities from automobile use and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we examine directly how gasoline taxes affect gasoline consumption as distinct from tax-inclusive retail gasoline prices. We find robust evidence that consumers respond more strongly to gasoline tax changes under a variety of model specifications. We discuss two potential reasons for our main findings as well as their implications.
Li, Shanjun, Joshua Linn, and Erich Muehlegger.
"Gasoline Taxes and Consumer Behavior."
American Economic Journal: Economic Policy,
Consumer Economics: Empirical Analysis
Taxation and Subsidies: Efficiency; Optimal Taxation
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Household
Mining, Extraction, and Refining: Hydrocarbon Fuels