optimum-tariff tax component in explaining national gasoline taxes. We find strong evidence that this component plays a … crucial role in countries’ taxation of gasoline. …

Least-squares estimates of the response of gasoline consumption to a change in the gasoline price 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 demonstrate that …