Date of This Version
This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids to gasoline-powered counterparts as the credit is phased out and expires, we are able to isolate the impact of the credit on the market price of hybrid vehicles. We conclude that hybrid prices increase by $0.75 on average for every additional dollar of credit. Thus, the majority of the subsidy accrues to manufacturers, potentially encouraging producers to increase the variety and availability of hybrid models on the market.
Working Paper Number
Boyle, Melissa and Matheson, Victor, "Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market" (2008). Economics Department Working Papers. Paper 49.