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Welfare Analysis Of The Vehicle Quota System In China

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  • Junji Xiao
  • Xiaolan Zhou
  • Wei‐Min Hu

Abstract

This article presents a welfare analysis of the vehicle quota system of Shanghai, China. The empirical findings suggest that the quota system leads to both welfare loss as a result of reduction in vehicle transactions and welfare gain because of less externality of auto consumption. The net effect depends on the shadow price of the marginal externality, the assumption of vehicle lifetime, and market conditions such as consumers' intrinsic preference for vehicles. Compared to a progressive tax system, the quota system is less effective in vehicle control but more efficient in improving social welfare.

Suggested Citation

  • Junji Xiao & Xiaolan Zhou & Wei‐Min Hu, 2017. "Welfare Analysis Of The Vehicle Quota System In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 617-650, May.
    • Handle: RePEc:wly:iecrev:v:58:y:2017:i:2:p:617-650
    DOI: 10.1111/iere.12229
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