Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268889 
Year of Publication: 
2023
Series/Report no.: 
CFS Working Paper Series No. 685
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
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 growth in response to an aggregate oil price shock. We find that the elasticity was stable near -0.3 until the end of 2014, but subsequently rose to about -0.2. Our estimates inform the recent debate about gasoline-tax holidays and policies to reduce carbon emissions.
Subjects: 
Price elasticity of gasoline demand
pass-through
gasoline tax
gasoline supply
identification
IV
cross-section
JEL: 
D12
L71
Q31
Q41
Q48
R48
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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