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Car Ownership and Status

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  • Erik T. Verhoef

    ()
    (Vrije Universiteit Amsterdam)

  • Bert van Wee

    (RIVM/Utrecht University)

Abstract

Research on 'happiness' suggests that once an average per capitaincome of around US$10,000 is achieved in acountry, further increases in income will not lead to a significantincrease in happiness. Additional income willprobably often be spent on the satisfaction of mainly 'relative'needs, of which 'status goods' would be oneexample. From that perspective, an overall shift to more fuel-efficient cars (i.e. smaller cars with less power) wouldnot necessarily, or only to a limited extent, result in lesshappiness. From a welfare economic perspective, thesatisfaction of the relative needs pertaining to consumption can beconsidered as a form of consumptionexternalities. This creates a welfare economic basis for governmentintervention. A model in which theseconsumption externalities are studied is presented here. Governmentintervention would include stimulatingconsumption of lower-status goods and discouraging consumption ofhigher-status ones. We speculate, however,that to achieve a significant increase in the fuel efficiency of acountry's car fleet through pricing policies, hugeprice increases may often be needed. As acceptance of price increasesas a policy instrument is often low, "fee-bates" and tradeable permits may be more preferable instruments.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-076/3.

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Date of creation: 26 Sep 2000
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Handle: RePEc:dgr:uvatin:20000076

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Web page: http://www.tinbergen.nl

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References

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  1. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Plotkin, Steven E & Greene, David, 1997. "Prospects for improving the fuel economy of light-duty vehicles," Energy Policy, Elsevier, Elsevier, vol. 25(14-15), pages 1179-1188, December.
  3. E Verhoef & P Nijkamp & P Rietveld, 1997. "Tradeable permits: their potential in the regulation of road transport externalities," Environment and Planning B: Planning and Design, Pion Ltd, London, Pion Ltd, London, vol. 24(4), pages 527-548, July.
  4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, American Economic Association, vol. 67(2), pages 76-90, March.
  5. Peake, Stephen, 1997. "Editor's introduction : Transport, energy and climate change," Energy Policy, Elsevier, Elsevier, vol. 25(14-15), pages iii-iv, December.
  6. E. V. K. Fitzgerald & Frances Stewart, 1997. "Editors' introduction," Oxford Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 25(1), pages 5-10.
  7. Frijters, Paul, 1998. "A model of fashions and status," Economic Modelling, Elsevier, Elsevier, vol. 15(4), pages 501-517, October.
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Cited by:
  1. Heffner, Reid R. & Kurani, Ken & Turrentine, Tom, 2005. "Effects of Vehicle Image in Gasoline-Hybrid Electric Vehicles," Institute of Transportation Studies, Working Paper Series, Institute of Transportation Studies, UC Davis qt5gd4n9nc, Institute of Transportation Studies, UC Davis.
  2. Heffner, Reid R. & Kurani, Kenneth S & Turrentine, Tom, 2005. "Effects of Vehicle Image in Gasoline-Hybrid Electric Vehicles," Institute of Transportation Studies, Working Paper Series, Institute of Transportation Studies, UC Davis qt812778bc, Institute of Transportation Studies, UC Davis.

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