QUASI-EXPERIMENTAL TAXATION ELASTICITIES OF UNITED-STATES GASOLINE DEMAND

Taxation elasticities provide useful inputs in public policy aimed al raising revenues. Using the quasi-experimental method, this paper calc ulates gasoline taxation elasticities for the USA over 1952-86. The me dian (mean) elasticity over this period is found to be -0.075 (-0.122) . However, the elasticity following the oil shock of 1973 is found to be statistically different from the pre-shock elasticity. Reasons for this change in elasticity are discussed. The implication of this analy sis is that tax policies based on price elasticities, rather than on t ax elasticities, might be using an inappropriate elasticity estimate a nd consequently misinterpreting the government's ability to raise tax revenues - especially in the post-embargo era.