Fuel consumption and gasoline prices: The role of assortative matching between households and automobiles

• Main Authors: Banzhaf, H.S (Author), Kasim, M.T (Author)
• Format: Article
• Language: English
• Published: Academic Press Inc. 2019
• Subjects: automobile; Automobiles; Automotive fleet; Compositional effects; cost analysis; Costs; demand analysis; Digital storage; Empirical estimate; Energy; Environmental benefits; environmental economics; fuel consumption; Fuel consumption; Fuel economy; Fuel-efficient vehicles; Gasoline; Gasoline demand; High utilizations; policy approach; price determination; United States
• Online Access: View Fulltext in Publisher
• ISBN: 00950696 (ISSN)
• DOI: 10.1016/j.jeem.2018.11.010

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 policies change 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