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There is an intense debate over whether fuel economy standards or fuel taxation is the more efficient policy instrument to raise fuel economy and reduce CO2 emissions of cars. The aim of this paper is to analyze the impact of standards and fuel prices on new car fuel economy with the aid of...
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fuel tax raises household demand for more fuel efficient cars, provided that the demand for car use is inelastic; it … reduces the demand for more fuel efficient cars. Incorporating price adjustments at the market level, we find th at fuel taxes … illustrated using a numerical version of the model. The analysis shows that modeling the effect of tax changes on household …
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