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The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel Economy Standards

Author

Listed:
  • Koichiro Ito

    (University of Chicago and NBER)

  • James M. Sallee

    (University of California, Berkeley, and NBER)

Abstract

We study attribute-based regulations, under which regulatory compliance of a firm, product, or individual depends on a secondary attribute that is not the intended target of the regulation. We develop a theoretical model of the welfare consequences of attribute basing, including its distortionary costs and potential benefits. We then quantify these welfare consequences using quasi-experimental evidence from weight-based fuel economy regulations.We use bunching analysis to showthat vehicle weight increased in response to regulation. We also leverage a policy change and develop a new method for analyzing double-notched policies to compare the costs and benefits of a specific attribute-based policy.

Suggested Citation

  • Koichiro Ito & James M. Sallee, 2018. "The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel Economy Standards," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 319-336, May.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:2:p:319-336
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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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