An econometric model of the interactions between energy demand and regional economic activity is discussed. The model combines dynamic cost functions, consumer fuel demand equations, and a demographic model, all within the context of a regional econometric model. The model is used to estimate the effects of a graduated fifty-cent gasoline tax on the New York State economy. The gasoline tax revenues are rebated to users in the form of reduced State taxes. The results suggest that this policy would lead to higher State output and income if the inflationary impacts of the tax are minimal.
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