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Externalities of Policy-Induced Scrappage: The Case of Automotive Safety Inspections

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

Abstract

Many transportation policies indirectly affect 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 to estimate the effects of policy-induced changes in fleet size on travel and fuel use. Using a first-stage difference-in-differences model, we estimate that the removal of safety inspection requirements causes a 5% increase in fleet size on average. Using a second-stage instrumental variables framework robust to weak instruments, we can reject fleet-size elasticities of fleet travel distance above 0.43 and fleet-size elasticities of fleet gasoline consumption above 0.10. Our estimates suggest that assuming fleet-size elasticities of 1 would overestimate the total national externality costs of removing safety inspections by at least 150%, amounting to a cumulative national aggregate error from 1970 to 2017 exceeding $90 billion.

Suggested Citation

  • Connor R. Forsythe & Akshaya Jha & Jeremy J. Michalek & Kate S. Whitefoot, 2026. "Externalities of Policy-Induced Scrappage: The Case of Automotive Safety Inspections," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 13(2), pages 355-387.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/739286
    DOI: 10.1086/739286
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