Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are … biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument … for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We …

Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are … biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument … for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We …

We propose a new instrument for estimating the price elasticity of gasoline demand that exploits systematic differences … across U.S. states in the pass-through of oil price shocks to retail gasoline prices. We show that these differences are … primarily driven by the cost of producing and distributing gasoline, which varies with states' access to oil and gasoline …

We propose a new instrument for estimating the price elasticity of gasoline demand that exploits systematic differences … across U.S. states in the pass-through of oil price shocks to retail gasoline prices. These differences, which are primarily … driven by variation in the cost of producing and distributing gasoline, create cross-sectional dispersion in gasoline price …

Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are … biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument … for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We …