Title
Car user taxes, quality characteristics, and fuel efficiency Car user taxes, quality characteristics, and fuel efficiency
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
London ,
Subject
Economics
Source (journal)
Journal of transport economics and policy. - London, 1967, currens
Volume/pages
48(2014) :3 , p. 345-366
ISSN
0022-5258
ISI
000340698000001
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
We study the impact of car user taxes on vehicle quality and demand for kilometres. First, holding car prices fixed, we find that a higher fuel tax leads households to choose cars of better fuel efficiency, provided that the demand for car use is inelastic. Surprisingly, a higher kilometre tax reduces the demand for fuel efficiency. Next, we study how car prices react to the tax changes. Fuel taxes make owning very fuel-efficient cars more expensive, while reducing prices of cars of low fuel efficiency. Both fuel taxes and kilometre charges imply lower prices for large and powerful cars.
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