ITEM METADATA RECORD
Title: Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market
Authors: Grigolon, Laura
Reynaert, Mathias
Verboven, Frank
Issue Date: Dec-2014
Publisher: KU Leuven CES
Series Title: CES - Discussion paper series, DPS14.34 pages:1-49
Abstract: To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness of alternative tax policies? To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a long panel of European countries, and exploit variation in fuel prices by engine type. We find there is only modest undervaluation of fuel costs. As a consequence, fuel taxes are unambiguously more effective in reducing fuel usage than product taxes based on fuel economy, because fuel taxes better target high mileage consumers.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Econometrics, Leuven

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