Anders Ib Munk-Nielsen

The car sector is at the same time one of the key sectors for environmental goals and one of the biggest sources of tax revenue in Denmark. The purpose of the three chapters in this dissertation is to broaden our understanding of how households respond to taxation in terms of their driving, which cars they choose to buy, how long they own them, etc. The dissertation consists of three papers that all rely on Danish register data, which covers the full population of households and cars matched with data on driving. The first paper looks at how households change their driving in response to changes in fuel prices. In particular, we exploit a unique work distance measure to explore the heterogeneity in the fuel price elasticity, which is key for understanding the distributional effects of fuel taxation. The second paper looks at new car purchases and how households substitute between the different available car types, taking into account their subsequent driving. Two major Danish reforms, in 1997 and 2007, are analyzed and the main conclusion is that a simple fuel tax would have been a more cost-effective tool. The third chapter proposes a novel model of household car ownership and use that features endogeneous scrappage and used car prices. Households make their car decisions in a life-cycle framework and simultaneously make up the supply and demand sides in the used car market, which means that we can explicitly form the excess demand functions by aggregation. Simulations from the model illustrate the importance of accounting for macro shocks and equilibrium price adjustments in modeling the scrappage pattterns and the movements in the car age distribution over time.