$2.00 Gas! Studying the Effects of a Gas Tax Moratorium

There are surprisingly few estimates of the effect of sales taxes on retail prices, especially at the firm level. Further, along both sides of a state border, a change in one state%u2019s sales tax can shed light on the nature of competition, as a subset of firms effectively experiences a change in its marginal cost. This paper considers the suspension, and subsequent reinstatement, of the 5% gasoline sales tax in Illinois and Indiana following a temporary price spike in the spring of 2000. Earlier laws set the timing of the reinstatements, providing plausibly exogenous changes in the tax rates. Using a unique dataset of daily, gas station-level data, retail gas prices are found to drop by 3% following the suspension, and increase by 4% following the reinstatements. After linking the stations to driving distance data, some evidence suggests that the tax increases are associated with higher prices up to an hour%u2019s drive into neighboring states.

Evaluating the Effectiveness of Child Safety Seats and Seat Belts in Protecting Children from Injury

Young children are required to use child safety seats, and the age threshold at which children can legally graduate to seat belts has steadily increased. This paper tests the relative effectiveness of child safety seats, lap-and-shoulder seat belts, and lap belts in preventing injuries among motor vehicle passengers aged 2-6. We analyze three large, representative samples of crashes reported to police, as well as linked hospital data. We find no apparent difference in the two most serious injury categories for children in child safety seats versus lap-and-shoulder belts. Child safety seats provide a statistically significant 25% reduction in the least serious injury category. Lap belts are somewhat less effective than the two other types of restraints, but far superior to riding unrestrained.