Welfare Effects of Distortionary Tax Incentives Under Preference Heterogeneity: An Application to Employer-Provided Electric Cars

35 Pages Posted: 3 Jun 2014

See all articles by Alexandros Dimitropoulos

Alexandros Dimitropoulos

VU University Amsterdam, Department of Spatial Economics

Jos N. van Ommeren

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Paul Koster

VU University Amsterdam - Department of Spatial Economics

Piet Rietveld

VU University Amsterdam - Department of Spatial Economics (Deceased)

Date Written: June 3, 2014

Abstract

This paper presents an approach for the estimation of welfare effects of tax policy changes under heterogeneity in consumer preferences. The approach is applied to evaluate the welfare effects of current tax advantages for electric vehicles supplied as fringe benefits by employers. Drawing on stated preferences of Dutch company car drivers, we assess the short-run welfare effects of changes in the taxation of the private use of these vehicles. We find that the welfare gain of a marginal increase in the taxation of electric company cars is substantial and even outweighs the marginal tax revenue raised.

Keywords: Social welfare, Latent class, Stated preference, Company car, Electric vehicle, Plug-in hybrid

JEL Classification: D12, H23, H24, H31, O33, Q58, R41

Suggested Citation

Dimitropoulos, Alexandros and van Ommeren, Jos N. and Koster, Paul and Rietveld, Piet, Welfare Effects of Distortionary Tax Incentives Under Preference Heterogeneity: An Application to Employer-Provided Electric Cars (June 3, 2014). Available at SSRN: https://ssrn.com/abstract=2445304 or http://dx.doi.org/10.2139/ssrn.2445304

Alexandros Dimitropoulos (Contact Author)

VU University Amsterdam, Department of Spatial Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Jos N. Van Ommeren

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Paul Koster

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Piet Rietveld

VU University Amsterdam - Department of Spatial Economics (Deceased)

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446097 (Phone)
+31 20 4446004 (Fax)

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