Measuring tax incidence: a natural experiment in the hybrid vehicle market | Zendy

Melissa A. Boyle | Zendy; Victor A. Matheson | Zendy

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Measuring tax incidence: a natural experiment in the hybrid vehicle market

Author(s) -

Melissa A. Boyle,

Victor A. Matheson

Publication year - 2009

Publication title -

environmental economics and policy studies

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.621

H-Index - 23

eISSN - 1867-383X

pISSN - 1432-847X

DOI - 10.1007/bf03353981

Subject(s) - subsidy , liberian dollar , tax incidence , tax credit , variety (cybernetics) , business , economics , monetary economics , public economics , finance , tax reform , ad valorem tax , computer science , market economy , artificial intelligence

This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids to gasoline-powered counterparts as the credit is phased out and expires, we are able to isolate the impact of the credit on the market price of hybrid vehicles. We conclude that hybrid prices increase by $0.75 on average for every additional dollar of credit. Thus, the majority of the subsidy accrues to manufacturers, potentially encouraging producers to increase the variety and availability of hybrid models on the market.

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