TY  - JOUR
AU  - Fullerton,Don
AU  - West,Sarah
TI  - Tax and Subsidy Combinations for the Control of Car Pollution
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7774
PY  - 2000
Y2  - July 2000
UR  - http://www.nber.org/papers/w7774
L1  - http://www.nber.org/papers/w7774.pdf
N1  - Author contact info:
Don Fullerton
Department of Finance
University of Illinois
BIF Box#30 (MC520)
515 East Gregory Drive
Champaign, IL  61820
Tel: 217/244-3621
Fax: 217/244-3102
E-Mail: dfullert@illinois.edu

Sarah West
Dept. of Economics
Macalester College
1600 Grand Ave.
St. Paul, MN 55105
E-Mail: wests@macalester.edu
AB  - Despite technological advances, an individual car's emissions still cannot be measured reliably enough to impose a Pigovian tax.  This paper explores alternative market incentives that could be used instead.  We solve for second-best combinations of uniform taxes on gasoline, engine size, and vehicle age.  For 1,261 individuals and cars in the 1994 Consumer Expenditure Survey, we record the car's model, year, and number of cylinders. We then seek a corresponding car in data from the California Air Resources Board that shows the car's engine size, fuel efficiency, and emissions per mile.  We calculate the welfare improvement from a zero-tax scenario to the ideal Pigovian tax, and we find that 71 percent of that gain can be achieved by the second-best combination of taxes on gas, size, and vintage.  A gas tax alone attains 62 percent of that gain.  These results are robust to variation in the elasticity of substitution among goods.
ER  -