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Externalities of Policy-Induced Scrappage: The Case of Automotive Regulations

Author

Listed:
  • Connor R. Forsythe
  • Akshaya Jha
  • Jeremy J. Michalek
  • Kate S. Whitefoot

Abstract

Many transportation policies indirectly affect vehicle travel and resulting externalities by inducing changes in vehicle scrappage rates. We leverage the staggered removal of state-level safety inspection programs across the United States within an instrumental variables (IV) framework to produce the first estimates of the fleet-size elasticities of fleet travel distance and gasoline consumption. Our first-stage estimates indicate that the removal of safety inspections caused a 3-4% increase in fleet size on average. Our IV estimates of the fleet-size elasticities of fleet travel distance and gasoline consumption have 95% confidence sets that imply rejection of an assumption commonly used in prior analyses that these elasticities are equal to one. Calculations based on fleet-size elasticities of one result in substantial overestimates of the externality costs from increases in travel and fuel use from delays in scrappage due to the removal of safety inspections.

Suggested Citation

  • Connor R. Forsythe & Akshaya Jha & Jeremy J. Michalek & Kate S. Whitefoot, 2022. "Externalities of Policy-Induced Scrappage: The Case of Automotive Regulations," NBER Working Papers 30546, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30546
    Note: EEE
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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