NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taha Kasim

Dept. of Economics, Furman Univ.
3300 Poinsett Hwy.
Greenville, SC 29613

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NBER Working Papers and Publications

December 2016Fuel Consumption and Gasoline Prices: The Role of Assortative Matching between Households and Automobiles
with H. Spencer Banzhaf: w22983
Analyses of policies to reduce gasoline consumption have focused on two effects, a compositional effect on the fuel economy of the automotive fleet and a utilization effect on how much people drive. However, the literature has missed a third effect: a matching effect, in which the policy changes how high-utilization households are matched to fuel-efficient vehicles in equilibrium. We show that higher gas prices should lead to stronger assortative matching. Empirical estimates using US micro-level data are consistent with this hypothesis. We find a $1 gas tax would reduce US gas consumption by 1.5% through the matching effect alone.
 
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