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AP Photo
July 2012
Discussion Paper
By Erich Muehlegger, Shanjun Li and Joshua Linn
Gasoline taxes can be employed to correct externalities associated with automobile use in order to reduce dependency on foreign oil and raise government revenue. This paper examines how gasoline taxes affect consumer behavior as distinct from tax-exclusive gasoline prices. It suggests that traditional analysis could significantly underestimate policy impacts of tax changes and discusses the implications of these findings.
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