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Disguised Protectionism? Environmental Policy in the Japanese Car Market

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  • KITANO Taiju
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    The US government criticized Japanese environmental policies, which promoted eco-friendly car (eco-car) purchases via measures such as tax exemptions and subsidies, as disguised forms of protection by arguing that the fuel economy standard for the subsidy qualification was designed to be more beneficial to domestic firms. This paper examines Japanese environmental policies from 2005-2009 to assess whether or not they were adequately formulated from an environmental perspective. The analysis compares the outcomes between the actual fuel economy standard for subsidy qualification introduced in Japan and an alternative standard suggested by the US government. Simulation results based on the structural econometric model of multi-product oligopolistic competition show that although both alternative and actual standards are comparable for the average fuel economy of new cars sold, the former is inefficient in improving the fuel economy because it requires much larger subsidies to achieve the same average fuel economy level as that of the latter.

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    File URL: http://www.rieti.go.jp/jp/publications/dp/13e059.pdf
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    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13059.

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    Length: 31 pages
    Date of creation: Jun 2013
    Handle: RePEc:eti:dpaper:13059
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    8. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, 02.
    9. Kennedy Peter W., 1994. "Equilibrium Pollution Taxes in Open Economies with Imperfect Competition," Journal of Environmental Economics and Management, Elsevier, vol. 27(1), pages 49-63, July.
    10. Jerome Adda & Russell Cooper, 2000. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 778-806, August.
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    12. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
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