Date of Award

Winter 2012

Project Type


Program or Major


Degree Name

Doctor of Philosophy

First Advisor

Richard W England


When the economic literature refers to characteristics of the motor fuel market in the EU, one has to be cautious in comparing indicators across time and space because of the ongoing enlargement of the Union. This dissertation contributes to a limited empirical literature on motor fuel fiscal competition and discussions on fuel tourism and fiscal policy coordination in Europe. The first essay provides an overview of the EU market from 1994 to 2010 for four major motor fuels and its evolution at every stage of EU expansion. It examines changes in the characteristics and taxation rates of the EU representative member-country and shows that the EU countries decreased their motor fuel excise taxes, but increased VAT taxes.

There has been an ongoing dialogue in the EU about tax harmonization because fuel taxes impact prices of other goods as well as economic and environmental policies across Europe. Prior empirical literature on motor fuel convergence either ignores newer member states or was published before data for some of those states was available. The second essay empirically tests for club convergence in prices and taxes for four motor fuels used by the EU. It treats older and newer member states separately and also distinguishes between Eurozone and non-Eurozone countries. By analyzing these categories of countries separately, it attempts to obtain a more accurate picture of fuel tax and price convergence and finds some evidence for the emergence of market segmentation. The methodology allows for non-linearity of data, an important feature of prices.

By building upon the theoretical literature on fiscal federalism, the third essay empirically examines how political, economic, environmental and geographical factors influence taxes on motor fuels in the EU. It uses 2004-2010 data and spatial modeling techniques and finds that a 10% increase in the motor fuel excise tax by neighbors results in an up to 6% excise tax increase by an EU country. Countries in the EU also positively respond to VAT tax changes by their neighbors, meaning that national governments recognize mobility of tax bases for both motor fuels excise taxes and VAT taxes.