Dept. of Economics, Furman Univ.
3300 Poinsett Hwy.
Greenville, SC 29613
Information about this author at RePEc
NBER Working Papers and Publications
|December 2016||Fuel 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.