Stick or Carrot? Asymmetric Responses to Vehicle Registration Taxes in Norway

Abstract Vehicle registrations have been shown to strongly react tax reforms aimed at reducing CO 2 emissions from passengers’ cars, but are the effects equally strong for positive and negative changes? The literature on asymmetric reactions price changes has documented asymmetries everyday goods not yet considered durables. We leverage multiple vehicle registration (VRT) in Norway estimate their impact within car-model substitutions. stronger cars receiving cuts rebates than those affected by increases. corresponding estimated elasticity is − 1.99 VRT decreases 0.77 As consumers may also substitute across car models, our estimates represent a lower bound.