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Anticipation and environmental regulation

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  • Rittenhouse, Katherine
  • Zaragoza-Watkins, Matthew

Abstract

When agents expect a change in regulation to change the relative price of new durable goods they may shift purchases forward to avoid compliance costs. In the context of new-vehicle emission standards, prior analyses have not considered this adjustment margin. We model the effects of anticipation on sales and retirements of durable goods, and test our theory's predictions empirically using the 2007 implementation of heavy-duty emission standards. We find evidence that anticipation caused a sales spike just before the policy took effect and a symmetric sales slump after implementation, which resulted in 31,164 more freight-truck sales ahead of the new standard and as much as $118 million in environmental damages over the lifetimes of those vehicles.

Suggested Citation

  • Rittenhouse, Katherine & Zaragoza-Watkins, Matthew, 2018. "Anticipation and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 255-277.
  • Handle: RePEc:eee:jeeman:v:89:y:2018:i:c:p:255-277
    DOI: 10.1016/j.jeem.2018.03.005
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    Cited by:

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    2. Ye, Jingjing & Qin, Zhilong & Chen, Xiaoguang, 2021. "Adapt by adopting cleaner vehicles? — Evidence from a low-emission zone policy in Nanchang, China," China Economic Review, Elsevier, vol. 66(C).

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    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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