Market equilibrium and the environmental effects of tax adjustments in China's automobile industry

Junji XIAO, Heng JU

Research output: Journal PublicationsJournal Article (refereed)peer-review

26 Citations (Scopus)


This paper explores the effects of consumption-tax and fuel-tax adjustments in the Chinese automobile industry. Applying the model and simulation method of Berry, Levinson, and Pakes (1995), we conduct a comparative static analysis of equilibrium prices and sales, fuel consumption,and social welfare before and after tax adjustments. For the first time, we compare the progressivity of both taxes. Our empirical findings suggest that the fuel tax is effective in decreasing fuel consumption at the expense of social welfare, while the consumption tax does not significantly affect either fuel consumptionor social welfare.

Original languageEnglish
Pages (from-to)306-317
Number of pages12
JournalReview of Economics and Statistics
Issue number2
Publication statusPublished - May 2014
Externally publishedYes

Cite this