How Do Gasoline Prices Affect Fleet Fuel Economy?
Exploiting a rich data set of passenger vehicle registrations in twenty U.S. metropolitan statistical areas from 1997 to 2005, we examine the effects of gasoline prices on the automotive fleet's composition. We find that high gasoline prices affect fleet fuel economy through two channels: (1) shifting new auto purchases towards more fuel-efficient vehicles, and (2) speeding the scrappage of older, less fuel-efficient used vehicles. Policy simulations based on our econometric estimates suggest that a 10% increase in gasoline prices from 2005 levels will generate a 0.22% increase in fleet fuel economy in the short run and a 2.04% increase in the long run.
We thank Hunt Alcott, Soren Anderson, Arie Beresteanu, Paul Ellickson, Han Hong, Mark Jacobsen, Sarah West, the editor, two anonymous referees, and participants at Camp Resources XIV for their helpful comments. Financial support from Micro-Incentives Research Center at Duke University is gratefully acknowledged. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
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Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 113-37, August. citation courtesy of