The price of gasoline and the demand for fuel economy: evidence from monthly new vehicles sales data
Abstract: This paper uses a unique data set of monthly new vehicle sales by detailed model from 1978- 2007, and implements a new identification strategy to estimate the effect of the price of gasoline on consumer demand for fuel economy. We control for unobserved vehicle and consumer characteristics by using within model-year changes in the price of gasoline and vehicle sales. We find a significant demand response, as nearly half of the decline in market share of U.S. manufacturers from 2002-2007 was due to the increase in the price of gasoline. On the other hand, an increase in the gasoline tax would only modestly affect average fuel economy.
File(s): File format is application/pdf http://www.chicagofed.org/digital_assets/publications/working_papers/2009/wp2009_15.pdf
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series
Publication Date: 2009