Evaluating US Fuel Economy Standards in a Model with Producer and Household Heterogeneity
AbstractThis paper employs an empirically estimated model to study the equilibrium effects of an increase in the US corporate average fuel economy (CAFE) standards. I identify and model heterogeneity across firms and find that the profit impacts of CAFE fall almost entirely on domestic producers. The welfare analyses consider the simultaneous household decision of vehicle and miles traveled, allowing direct comparison with a gasoline tax. Finally, I consider dynamic impacts in the used car market. I find these comprise nearly half the gross welfare cost of CAFE and fall disproportionately on low-income households. Contrary to previous results, the overall welfare costs are regressive. (JEL H24, L51, L62)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Economic Policy.
Volume (Year): 5 (2013)
Issue (Month): 2 (May)
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
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