A chain of replacement model is used to examine the effects of automobile taxes and of a scrappage premium on the life length of cars, and on the size of the car fleet. The predictions of the model are tested on data on the scrappage of cars in Sweden 1989-2002. The theoretical model predicts that increased taxes on the purchase of cars should increase the life length of cars, and reduce the number of cars. A scrappage premium would have the opposite effects. Changes in periodic taxes would have no effects on the life length of automobiles, but would reduce the size of the car stock. The econometric analysis indicates, however, that the effects both on the life-length of cars, and on the size of the car parc are small. On the basis of the conclusions from the theoretical and the empirical analysis, the possible implications of the European Union's Directive 2000/53/EC on end-of life vehicles (ELV) are discussed.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
591.
Length: 35 pages Date of creation: 17 Mar 2003 Date of revision: Handle: RePEc:hhs:iuiwop:0591
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Find related papers by JEL classification: H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
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